Commissioner Of Central Excise, Delhi vs Carrier Aircon Ltd

M/s. Carrier Aircon Limited (respondent herein) is engaged in the manufacture of chillers besides other goods i.e. room air-conditioners, air handling units, gas compressors, radiators for central heating and parts of aforesaid goods. Respondent classified the chillers manufactured by it as refrigerating and freezing equipments under sub-heading No.8418.10 of the First Schedule to the Central Excise Tariff Act, 1985 (for short the "Tariff Act"). The classification list was accepted by the Department.

Commissioner of Central Excise, Central Excise Commissionarate, Delhi-III, issued a show cause notice dated 3.8.1999 to the respondent requiring them to state their case, vis-a-vis, the department's proposal to classify their product "chiller" under Chapter Heading 84.15 instead of Chapter Heading 84.18 on the grounds mentioned therein. It was alleged in the notice that from the end use of the "chillers" being manufactured by the respondent, it was evident that the said "chillers" were nothing but an integral part of the centrally air-conditioning system. That complete central air-conditioning plant comes into existence when the said chiller is fitted with air handling unit or fan coil unit, ducting, piping and pumps etc,. On perusal of the description of 'chillers' as submitted by the respondent vis-`-vis the description of goods available under Chapter Heading 84.18 it was observed that the description and functioning of the chillers was not covered under Chapter Heading 84.18. During the course of investigation, statements of Shri R.K. Verma, AGM (CBU) who is a Mechanical Engineer, working with the respondent and Shri A.K. Mehra, B.Sc. Engineering Electrical, working as a Manager (Mechanical) dealing with designs of mechanical engineering in M/s. Jacob H & G Ltd., were recorded.

(Rupees One Crore Eighty Four Lac Sixty Two Thousand One Hundred Thirty Six only) short-paid on 249 number of chillers collectively valued at Rs.10,79,55,623/- cleared under sub-heading No.8418.00 instead of 8415.00 (details of which are given in Annexure 6 to this Show Cause Notice) during the period 01.08.94 to 30.9.96 and April 1997, January 1998 should not be demanded from them under rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944;

The Commissioner, Central Excise, in his order- in-original No. 9/2000 dated 24.3.2000 held that the chillers are classifiable under tariff heading No. 84.15 and not under tariff heading No. 84.18 as had been claimed by the respondent. It was held that the chillers are nothing but an integral part of the air-conditioning system. A complete central air-conditioning system comes into existence when chiller is fitted with air handling unit or with fan coil unit, ducting, piping, pumps etc. and no central air-conditioning plant can come into existence without a chiller. Applying the principal of 'end use' it was held that since more than 90% of the chillers manufactured and cleared by the respondent had been used in the commissioning of central air-conditioning plants and hardly 5 to 10% were put to application for other uses, the chillers were classifiable under heading 84.15 as parts of air-conditioning machine. Extended period of limitation was invoked as it was found that the respondent was guilty of suppression of facts. Accordingly, the demand of differential duty of Rs.1,84,62,136/- short paid on 249 chillers valued at Rs.10,79,55,623/- was confirmed and ordered to be recovered under Rule 9 (2) read with Section 11A. Penalty of Rs.1,84,62,136/- was imposed under Section 11AC of the Act. Interest was also ordered to be charged under Section 11AB of the Act.

Being aggrieved by the orders passed by the authority-in-original, respondent filed appeal before the Central Excise and Gold (Control) Appellate Tribunal (for short "the Tribunal"). The Tribunal by the impugned order has accepted the appeal, set aside the order-in-original and held that the end use of "chillers" in the air- conditioning system would not take away the primary or basic function of the chillers which is to produce chilled water by using a refrigeration circuit and the same shall fall under Chapter Heading 84.18 of the Tariff Act.

Since the Tribunal decided the case on merits it did not record any finding regarding invoking of the extended period of limitation under Section 11A. Since we are agreeing with the view taken by the Tribunal on merits, there is no need for us as well to go into the question regarding the extended period of limitation.

For the reasons recorded above, we do not find any merit in these appeals and dismiss the same leaving the parties to bear their own costs.