Sanden Vikas (India) Ltd. Vs. Collector of Central Excise, New Delhi
EmailAppeal: Civil Appeal No. 8079 of 1995
(From the Judgment and Order dated 31.3.95 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No. E/5095/92-B1 in F.O. No.E/195 of 1995-B1)
(From the Judgment and Order dated 31.3.95 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No. E/5095/92-B1 in F.O. No.E/195 of 1995-B1)
Petitioner: Sanden Vikas (India) Ltd.
Respondent: Collector of Central Excise, New Delhi
Apeal: Civil Appeal No. 8079 of 1995
(From the Judgment and Order dated 31.3.95 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No. E/5095/92-B1 in F.O. No.E/195 of 1995-B1)
(From the Judgment and Order dated 31.3.95 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No. E/5095/92-B1 in F.O. No.E/195 of 1995-B1)
Judges: SYED SHAH MOHAMMED QUADRI & ASHOK BHAN, JJ.
Date of Judgment: Apr 03, 2003
Appearances:
Mr. V. Lakshmikumaran, Mr. Alok Yadav, Mr. V. Balachandran, Advocates for the Appellant.
Mr. M.L. Verma, Senior Advocate, Mr. Dileep Tandon and Mr. B.K. Prasad, Advocates with him for the Respondent.
Head Note:
CENTRAL EXCISE LAWS
Central Excise Tariff Act, 1985
Tariff Heading No. 8415 – Classification of goods for the purposes of levy of excise duty – Car air-conditioning kits – Classification – Scope of the exemption in terms of Notification No. 166/86CE, dated 1.3.1986 – Sl. No. 8 of the Notification specifying the rate of duty in respect of “Parts and accessories of car air conditioner including car air-conditioning kit” – Sl. No. 3 of the Notification specifying the duty rate in respect of window type, split type and package type air conditioners – Appellants manufacturing car air-condi–tion-ing kits and classifying the same under S.No. 8 of the Notification – Department however, classifying the same under S.No. 3 of the Notification – Tribunal upholding the said classification – Validity. Allowing the appeal and setting aside the order of the Tribunal held that the car airconditioning kit excepting the automotive gas compressor with or without magnetic clutch falls within the description of “Parts and accessories of car air-conditioner including car airconditioning kit” under S.No. 8 of the Notification. However the automotive gas compressor with or without magnetic clutch does not form part of car air-conditioners or car airconditioning kit and is liable to duty separately.
Held:
The explanation 2 added to the Notification dated 1.3.1986 provides that for purposes of the notification, the term “car air-conditioner kit” or “car airconditioning kit” shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch. In our view, the explanation has the effect of taking away the automotive gas compressor (with or without magnetic clutch) from out of the car airconditioning kit. The car airconditioning kit which comprises of parts of car air-conditioner remains as part of item no. 8 of the notification. The explanation cannot be so construed as to remove the term “car air-conditioner kit” or “airconditioning kit” itself from item no. 8 of the notification. What follows is that ‘car airconditioning kit minus automotive gas compressor with or without magnetic clutch’ will remain in the description of goods against item no. 8 of the notification and that the excluded part of the kit, namely, automotive gas compressor with or without magnetic clutch, will cease to be part of item no. 8 and will be liable to duty separately. (Para 18)
JUDGEMENT:
ASHOK BHAN, J.
1. This appeal, by the assessee, arises from the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal at New Delhi (for short, the Tribunal) in final order no. E/195/95-81, dated March 31, 1995.
2. The appellant-assessee is a manufacturer of car airconditioning kits. It classified the said goods under item no. 5 of heading 8415 of the schedule to the Central Excise Tariff Act, 1985 (for short, the Act) for the purpose of availing the benefit of exemption of notification no. 166/86-CE, dated March 1, 1986 (as amended from time to time). Though the appellant sought to contend that it was only manufacturing parts of the airconditioning kits and, therefore, the kit cannot be treated as an air-conditioner, the Assistant Collector did treat the same as airconditioning system falling under item no. 3 of heading 8415 of the notification. That order is said to be the subject matter of an appeal. Be that as it may, on March 20, 1990, a new entry, item no. 8 was added to the table of the notification, which reads thus:
……………………………………………………………………..
Sl.No. Heading Description Rate Condi-
No. or of goods tions
sub-head-
ing no.
……………………………………………………………………..
08. 84.15 parts and acce- sixty –
84.18 ssories of car five per-
84.19 air-conditioner cent ad
8481.10 including car valorem
8481.91 air-conditio-
8536.10 ning kits
9032.11
or
9032.91
……………………………………………………………………..
3. Thereafter, the appellant classified the airconditioning kits under the said entry for purposes or levy of excise duty. On October 1, 1990, the Assistant Collector, Central Excise, Division -I, Faridabad issued a notice to the appellant stating that under the said entry (sl. no. 8), the sub-heading relating to compressor has not been included in the second column of the table and, as the car airconditioning kits include compressors, they fall under item no. 3 (heading 8415.00) of the notification; the appellant was called upon to show cause as to why excise duty amounted to Rs. 2,20,74,021.30 should not be demanded from it. We are informed that there have been series of notices and the total net demand under the said notices was in a sum of Rs. 3,68,81,590/-. The appellant replied to the show cause notice asserting that the car airconditioning kits, inclusive of compressor, manufactured by it, is a machinery especially designed to be used for airconditioning of motor vehicle but, as it is not usable as room air-conditioner, split unit air-conditioner or package type air-conditioner, it cannot be classified in that group; the components of the car air-conditioner kits are nothing but parts of car air-conditioner and the car airconditioning kit was known as such in common parlance, and, therefore, it was classifiable under sl. no. 8 of the said notification.
4. The Assistant Collector by his order dated January 24, 1992 confirmed the demand. It was upheld by the Collector (Appeals) by his order dated July, 13, 1992. The appellant carried the matter in appeal before the tribunal. By the impugned order, the tribunal dismissed the appeal. It is against that order that the appellant is in appeal before us.
5. Mr. Sridharan, the learned counsel for the appellant, contends that for the period before 1990 as well as after 1990, the case of the appellant has consistently been that a car airconditioning kits comprises of only parts and it cannot be treated as an airconditioning system within the meaning of item no. 3 of the said notification. Mr. Verma, the learned senior counsel appearing for the revenue, on the other hand, contends that inasmuch as the parts put together produce the effect of cooling, as found by the Assistant Collector and confirmed by the Collector (Appeals) and the tribunal, it can appropriately be called as airconditioning system and would, therefore, be dutiable under item no. 3 of the said notification.
6. To appreciate the contentions of the learned counsel, we may refer to the substance of the said notification.
7. By the said notification, the Central government exempted the goods of the description specified in column (3) of the table annexed to the notification and falling under heading no. or sub-heading no. of the schedule to the Central Excise Tariff Act, 1985 specified in the corresponding entry in column 2 of the said table from so much of the duty of excise leviable thereon, which is specified in the said schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said table. This was subject to the conditions, if any, laid down in the corresponding entry in column (5) thereof.
8. The germane question that arises for consideration is : whether the car airconditioning kit is classifiable under item no. 3 or under item no. 8 of the table to the said notification.
9. Item no. 3 of the said notification reads as under:
……………………………………………………………………..
Sl.No. Heading Description Rate Condi-
No. or of goods tions
sub-head-
ing no.
……………………………………………………………………..
03. 8415.00 Air-conditioners –
including room
air-conditioners
(window type),
split unit air-
conditioners and
package type
air-conditioners
(a) of capacity not
exceeding
1.5 tonnes Rs. 10000
per
air-condi-
tioner
(b) of capacity –
exceeding
1.5 tonnes but
not exceeding
3 tonnes. Rs.12,000
per
air-condi-
tioner-
(c) of capacity –
exceeding
3 tonnes but
not exceeding
7.5 tonnes Rs.21,000/-
per
air-condi-
tioner –
(d) of capacity –
of exceeding
7.5 tonnes but
not exceeding
10 tonnes Rs.42,000/-
per
air-condi-
tioner –
(e) of capacity –
exceeding
10 tonnes but
not exceeding
15 tonnes Rs.44,000
per
air-condi-
tioner
……………………………………………………………………..
10. The description of the goods given against item no. 3, in column (3), is air-conditioners which include room air-conditioners (window type), split unit air-conditioners and package type air-conditioners which are classifiable under heading 8415.00 of the schedule to the Act. The description of the goods mentioned in column (3) against item no. 5, before March 20, 1990, was : “parts and accessories of refrigerating and airconditioning appliances and machinery, all sorts”. It is worth noticing that in this item there was no mention of the “parts and accessories of car air-conditioner including car air-conditioner kit.” Under item no. 5, entries in column (2) of the table includes various sub-headings, namely, 84.15, 84.18, 84.19, 8476.91, 8481.10, 8481.91, 8536.10, 9032.11 or 9032.91. These sub-headings refer to parts and accessories of goods falling thereunder; the sub-heading (8414.10) relating to gas compressors is not shown therein. After the amendment, made on March 20, 1990, in column (3) the following words were added against item no. 5:
“other than the parts and accessories of car air-conditioner including car air-conditioner kit.”
11. What is excluded from item no. 5 is mentioned against item no. 8, quoted above.
12. From the ‘memorandum explaining the provisions in the Finance Bill, 1990’, insofar as it relates to chapter 84, the following needs to be referred.
“45. Chapter 84
45.1 Car airconditioning parts including kits thereof.
(i) Notification no. 166/86-Central Excises dated 1.3.86 is being amended so as to increase duty on car airconditioning parts including kits from the existing 40% ad valorem to 65% ad valorem. The duty of air-conditioner of capacity not exceeding 1.5 tonnes is being raised from Rs. 9450/- per air-conditioner to Rs. 10000/- per air-conditioner. (For details, notification no. 75/90 – Central Excises may be seen.)”
13. A careful reading of the items aforementioned, in the light of the note under chapter 84 in the memorandum, leaves no doubt in our minds that exclusion of the aforementioned goods from the description of goods against item no. 5 and their specification against item no. 8, with effect from March 20, 1990, was with the intention of creating a specific entry in regard to car air-conditioners – both parts and accessories thereof as well as car airconditioning kits.
14. As the airconditioning kit is meant for providing airconditioning in car and as the description of the goods first mentioned against column (3) which notes air-conditioners, we are inclined to take the view that the car airconditioning kits fell within the meaning of the air-conditioners against item no. 3 before March 20, 1990. This position continued till item no. 5 was amended and item no. 8 was inserted in the said notification where specific entry with regard to parts and accessories of car air-conditioner and car airconditioning kit was provided.
15. It is a settled position of law that specific entry prevails over general entry and, therefore with effect from March 20, 1990 till July 25, 1991, air-conditioner kits which comprise of various parts are classifiable against item no. 8 of the said notification.
16. On July 25, 1991, explanation-2 was added to the said notification which reads as follows:
“Explanation (2) – For the purpose of this notification, the term ‘car air-conditioner kit” or “car airconditioning kit” shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch.”
17. In regard to this explanation, Mr. Verma contends that this clarifies the position that the car airconditioning kit will not be an item of goods under item no. 8 and would form part of item no. 3. Relying on the words in the explanation, namely, “shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch.”, Mr. Verma submits that as, admittedly, air-conditioner unit contains automotive gas compressor, therefore, it will not be part of item no. 8. On the contrary, Mr. Sridharan contends that airconditioning kit would remain as part of item no. 8 but compressor will be chargeable to levy of duty against item no. 1 thereof.
18. To resolve this controversy, we shall revert to the wording of the said explanation. It provides that for purposes of the notification, the term “car air-conditioner kit” or “car airconditioning kit” shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch. In our view, the explanation has the effect of taking away the automotive gas compressor (with or without magnetic clutch) from out of the car airconditioning kit. The car airconditioning kit which comprises of parts of car air-conditioner remains as part of item no. 8 of the notification. The explanation cannot be so construed as to remove the term “car air-conditioner kit” or “airconditioning kit” itself from item no. 8 of the notification. What follows is that ‘car airconditioning kit minus automotive gas compressor with or without magnetic clutch’ will remain in the description of goods against item no. 8 of the notification and that the excluded part of the kit, namely, automotive gas compressor with or without magnetic clutch, will cease to be part of item no. 8 and will be liable to duty separately.
19. In this view of the matter, the order under appeal is set aside. The appeal is, accordingly allowed, as indicated above.
There shall be no order as to costs.
1. This appeal, by the assessee, arises from the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal at New Delhi (for short, the Tribunal) in final order no. E/195/95-81, dated March 31, 1995.
2. The appellant-assessee is a manufacturer of car airconditioning kits. It classified the said goods under item no. 5 of heading 8415 of the schedule to the Central Excise Tariff Act, 1985 (for short, the Act) for the purpose of availing the benefit of exemption of notification no. 166/86-CE, dated March 1, 1986 (as amended from time to time). Though the appellant sought to contend that it was only manufacturing parts of the airconditioning kits and, therefore, the kit cannot be treated as an air-conditioner, the Assistant Collector did treat the same as airconditioning system falling under item no. 3 of heading 8415 of the notification. That order is said to be the subject matter of an appeal. Be that as it may, on March 20, 1990, a new entry, item no. 8 was added to the table of the notification, which reads thus:
……………………………………………………………………..
Sl.No. Heading Description Rate Condi-
No. or of goods tions
sub-head-
ing no.
……………………………………………………………………..
08. 84.15 parts and acce- sixty –
84.18 ssories of car five per-
84.19 air-conditioner cent ad
8481.10 including car valorem
8481.91 air-conditio-
8536.10 ning kits
9032.11
or
9032.91
……………………………………………………………………..
3. Thereafter, the appellant classified the airconditioning kits under the said entry for purposes or levy of excise duty. On October 1, 1990, the Assistant Collector, Central Excise, Division -I, Faridabad issued a notice to the appellant stating that under the said entry (sl. no. 8), the sub-heading relating to compressor has not been included in the second column of the table and, as the car airconditioning kits include compressors, they fall under item no. 3 (heading 8415.00) of the notification; the appellant was called upon to show cause as to why excise duty amounted to Rs. 2,20,74,021.30 should not be demanded from it. We are informed that there have been series of notices and the total net demand under the said notices was in a sum of Rs. 3,68,81,590/-. The appellant replied to the show cause notice asserting that the car airconditioning kits, inclusive of compressor, manufactured by it, is a machinery especially designed to be used for airconditioning of motor vehicle but, as it is not usable as room air-conditioner, split unit air-conditioner or package type air-conditioner, it cannot be classified in that group; the components of the car air-conditioner kits are nothing but parts of car air-conditioner and the car airconditioning kit was known as such in common parlance, and, therefore, it was classifiable under sl. no. 8 of the said notification.
4. The Assistant Collector by his order dated January 24, 1992 confirmed the demand. It was upheld by the Collector (Appeals) by his order dated July, 13, 1992. The appellant carried the matter in appeal before the tribunal. By the impugned order, the tribunal dismissed the appeal. It is against that order that the appellant is in appeal before us.
5. Mr. Sridharan, the learned counsel for the appellant, contends that for the period before 1990 as well as after 1990, the case of the appellant has consistently been that a car airconditioning kits comprises of only parts and it cannot be treated as an airconditioning system within the meaning of item no. 3 of the said notification. Mr. Verma, the learned senior counsel appearing for the revenue, on the other hand, contends that inasmuch as the parts put together produce the effect of cooling, as found by the Assistant Collector and confirmed by the Collector (Appeals) and the tribunal, it can appropriately be called as airconditioning system and would, therefore, be dutiable under item no. 3 of the said notification.
6. To appreciate the contentions of the learned counsel, we may refer to the substance of the said notification.
7. By the said notification, the Central government exempted the goods of the description specified in column (3) of the table annexed to the notification and falling under heading no. or sub-heading no. of the schedule to the Central Excise Tariff Act, 1985 specified in the corresponding entry in column 2 of the said table from so much of the duty of excise leviable thereon, which is specified in the said schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said table. This was subject to the conditions, if any, laid down in the corresponding entry in column (5) thereof.
8. The germane question that arises for consideration is : whether the car airconditioning kit is classifiable under item no. 3 or under item no. 8 of the table to the said notification.
9. Item no. 3 of the said notification reads as under:
……………………………………………………………………..
Sl.No. Heading Description Rate Condi-
No. or of goods tions
sub-head-
ing no.
……………………………………………………………………..
03. 8415.00 Air-conditioners –
including room
air-conditioners
(window type),
split unit air-
conditioners and
package type
air-conditioners
(a) of capacity not
exceeding
1.5 tonnes Rs. 10000
per
air-condi-
tioner
(b) of capacity –
exceeding
1.5 tonnes but
not exceeding
3 tonnes. Rs.12,000
per
air-condi-
tioner-
(c) of capacity –
exceeding
3 tonnes but
not exceeding
7.5 tonnes Rs.21,000/-
per
air-condi-
tioner –
(d) of capacity –
of exceeding
7.5 tonnes but
not exceeding
10 tonnes Rs.42,000/-
per
air-condi-
tioner –
(e) of capacity –
exceeding
10 tonnes but
not exceeding
15 tonnes Rs.44,000
per
air-condi-
tioner
……………………………………………………………………..
10. The description of the goods given against item no. 3, in column (3), is air-conditioners which include room air-conditioners (window type), split unit air-conditioners and package type air-conditioners which are classifiable under heading 8415.00 of the schedule to the Act. The description of the goods mentioned in column (3) against item no. 5, before March 20, 1990, was : “parts and accessories of refrigerating and airconditioning appliances and machinery, all sorts”. It is worth noticing that in this item there was no mention of the “parts and accessories of car air-conditioner including car air-conditioner kit.” Under item no. 5, entries in column (2) of the table includes various sub-headings, namely, 84.15, 84.18, 84.19, 8476.91, 8481.10, 8481.91, 8536.10, 9032.11 or 9032.91. These sub-headings refer to parts and accessories of goods falling thereunder; the sub-heading (8414.10) relating to gas compressors is not shown therein. After the amendment, made on March 20, 1990, in column (3) the following words were added against item no. 5:
“other than the parts and accessories of car air-conditioner including car air-conditioner kit.”
11. What is excluded from item no. 5 is mentioned against item no. 8, quoted above.
12. From the ‘memorandum explaining the provisions in the Finance Bill, 1990’, insofar as it relates to chapter 84, the following needs to be referred.
“45. Chapter 84
45.1 Car airconditioning parts including kits thereof.
(i) Notification no. 166/86-Central Excises dated 1.3.86 is being amended so as to increase duty on car airconditioning parts including kits from the existing 40% ad valorem to 65% ad valorem. The duty of air-conditioner of capacity not exceeding 1.5 tonnes is being raised from Rs. 9450/- per air-conditioner to Rs. 10000/- per air-conditioner. (For details, notification no. 75/90 – Central Excises may be seen.)”
13. A careful reading of the items aforementioned, in the light of the note under chapter 84 in the memorandum, leaves no doubt in our minds that exclusion of the aforementioned goods from the description of goods against item no. 5 and their specification against item no. 8, with effect from March 20, 1990, was with the intention of creating a specific entry in regard to car air-conditioners – both parts and accessories thereof as well as car airconditioning kits.
14. As the airconditioning kit is meant for providing airconditioning in car and as the description of the goods first mentioned against column (3) which notes air-conditioners, we are inclined to take the view that the car airconditioning kits fell within the meaning of the air-conditioners against item no. 3 before March 20, 1990. This position continued till item no. 5 was amended and item no. 8 was inserted in the said notification where specific entry with regard to parts and accessories of car air-conditioner and car airconditioning kit was provided.
15. It is a settled position of law that specific entry prevails over general entry and, therefore with effect from March 20, 1990 till July 25, 1991, air-conditioner kits which comprise of various parts are classifiable against item no. 8 of the said notification.
16. On July 25, 1991, explanation-2 was added to the said notification which reads as follows:
“Explanation (2) – For the purpose of this notification, the term ‘car air-conditioner kit” or “car airconditioning kit” shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch.”
17. In regard to this explanation, Mr. Verma contends that this clarifies the position that the car airconditioning kit will not be an item of goods under item no. 8 and would form part of item no. 3. Relying on the words in the explanation, namely, “shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch.”, Mr. Verma submits that as, admittedly, air-conditioner unit contains automotive gas compressor, therefore, it will not be part of item no. 8. On the contrary, Mr. Sridharan contends that airconditioning kit would remain as part of item no. 8 but compressor will be chargeable to levy of duty against item no. 1 thereof.
18. To resolve this controversy, we shall revert to the wording of the said explanation. It provides that for purposes of the notification, the term “car air-conditioner kit” or “car airconditioning kit” shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic clutch. In our view, the explanation has the effect of taking away the automotive gas compressor (with or without magnetic clutch) from out of the car airconditioning kit. The car airconditioning kit which comprises of parts of car air-conditioner remains as part of item no. 8 of the notification. The explanation cannot be so construed as to remove the term “car air-conditioner kit” or “airconditioning kit” itself from item no. 8 of the notification. What follows is that ‘car airconditioning kit minus automotive gas compressor with or without magnetic clutch’ will remain in the description of goods against item no. 8 of the notification and that the excluded part of the kit, namely, automotive gas compressor with or without magnetic clutch, will cease to be part of item no. 8 and will be liable to duty separately.
19. In this view of the matter, the order under appeal is set aside. The appeal is, accordingly allowed, as indicated above.
There shall be no order as to costs.
