2004 (97) ECC 76 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Zonal Bench -- Mumbai

S.S. Sekhon, Member (T) and Krishna Kumar, Member (J)

Voltas Ltd. & Ors

Versus

Commissioner of Central Excise, Mumbai-VI

Appeals No. E/3353 to 3356/98 Bom

[Arising out of Order-in-Original 3/98/Commr/VI dated 5.8.1998 passed by the Commissioner of Central Excise, Mumbai VI]

Order No. A/268-271/WZB/2004-C-II, dated 21.5.04, Certified on 2.6.2004

Classification (C. Excise)

Conditioning and refrigeration machinery condensers, evaporators, chillers under Heading 8419 -- Which inter alia included machinery for treatment of materials by a process involving a change of temperature such as heating, cooking, and brought in other words condensing for cooling -- Condensers are uncontested to be using gases for the cooling purpose. Classification list approved by the union budget 1996 amended tariff Heading 8419 and an entry in sub-heading 8419.10 added -- Hence the classification is correct accept the condenser classification is not upheld which is remained to be classified under 8419 and chillers have to be classified under Heading 8418.

PRESENT :

Shri D.B. Shroff, Adv. for the appellant.

Shri Sanjay Singhal, DR for the respondent.

Cases Cited :

1. Carrier Aircon Ltd., 2001 (128) ELT 485........................................................... [Para 2]

2. Indian Hotels Ltd., 2001 (134) ELT 451............................................................ [Para 2]

3. Universal Commercial Corporation, 1994 (69) ELT 150...................................... [Para 2]

Per : S.S. Sekhon

The appellants are manufacturers of air-conditioning machines and machinery and parts thereof. Pursuant to an intelligence that they had misclassified their products, namely condensers and chillers under Chapter Heading 8419.10 with effect from 1.3.1997 and were paying duty @ 13% ad valorem instead of 30% ad valorem under Chapter Heading 8415 which was required as per the changes introduced by Finance Bill of 1997 resulted in evasion of duty, also inputs sent for job work under Rule 57F (3)/(4) were not received back within the stipulated period of sixty days from the job worker, Modvat credit was misutilised, were visited by the officers, enquiries were caused to be made, a Show Cause Notice was issued. However, even prior to the issue of the Show Cause Notice, the appellant had reversed an amount of duty of Rs. 37.33 lakhs approx, Rs. 67,000 approx of Modvat credit reversed in respect of inputs not received back within sixty days, the remaining amount of Rs. 36.66 lakhs approx on account of difference in duty amounts on clearances of chillers and condensers. The Commissioner, pursuant to the Show Cause Notice issued, confirmed the reversals of Modvat credit, the classification of the two entities under Chapter Heading 8419 confirmed the different dates and imposed penalties on the appellant company and its three executives. Hence these appeals.

2. After hearing both sides and considering the materials on record, it is found that:

(a) since 1.2.1986, the appellants have been classifying parts of air conditioning and refrigeration machinery including condensers, evaporators, chillers under Heading 8419, which inter alia included machinery for treatment of materials by a process involving a change of temperature such as heating, cooking and brought in other words condensing or cooling. Condensers are uncontested to be using gases for the cooling purpose. Classification lists filed were approved the Union Budget of 1996 amended Tariff Heading 8419 and an Entry 8419 was split into sub-heading 8419.10 covering `air-conditioning and refrigeration machinery' and Heading 8419.91 `Parts of the goods covered by sub-heading 8419.10.' The impugned items were cleared under 84.19. With effect from 1.3.1997, Sub-Headings of 8419 were amended, to read as under 8419.10- `All goods other than parts'. 8419.90 -- `Parts.' The four digit heading 8419, however was not altered and continued to cover machinery for treatment of materials by a process involving a change of temperature, and as `condensing or cooling.'

(b) The description of four digit Heading 8419 remains the same, has not been altered or/and amended since 1.3.1986. Whatever was covered under that would remain to be covered. The only alteration by changing the six digit heading cannot lead to an exclusion of the items covered by the four digit heading. Therefore, the attempt to change the classification from Heading 8419 to 8415, cannot be effected, merely because the split headings or six digit headings under 8419 wordings had been amended. HSN categorises all goods under various chapters and thereafter a four digit heading, which is further split into eight digits heading as required by various contracting countries. The further sub division into a four digit heading cannot rule out the coverage of classification of an entity under the four digits heading, merely because of some interpretation being placed, as in this case, on comments appearing in R.K. Jain's Tariff 1997-98 and/or the Trade Notices, and relied upon by the Commissioner. "Condensers" are mentioned under head notes in HSN and covered under Heading 8419. There is no reason to alter and shift their classification from 8419. On alteration of sub headings covered under Heading 8419 cannot be discarded. The Commissioner has not arrived at any reasons for classifying the items in Heading 8415 based on any HSN Notes thereafter. The said classification therefore is not upheld.

(c) The Learned D.R's reliance on the decision of Universal Commercial Corporation, 1994 (69) ELT 150 substantiate classification "condensers" and Heading 8415 cannot be upheld since the goods in that case were "condenser unit" and not `condensers' simpliciter as in this case. The `condenser unit' in that case had attained the status of an incomplete air-conditioner. No material exists to come to a conclusion that the `condensers' herein to have attained the status of an incomplete or partially complete air-conditioner machine to shift the classification from 8419 to 8415. However, the reliance of the D.R. in the case of Chillers to fall under Heading 8418 has to be upheld following the classification decision of the Tribunal in the case of Carrier Aircon Ltd. 2001 (128) ELT 485 & Indian Hotels Ltd., 2001 (134) ELT 451. No contrary decision has been shown by the learned Advocate for the appellants. The classification of chillers under 8415 cannot be approved.

(d) On a perusal of the statement of Mr. Parab, the Executive of the appellants, who was responsible for making the declarations, after the changes introduced by the Finance Bill 1997, it is apparent, that there was a reasonable belief in the minds of these Executives that the classifications, as declared under Heading 8419 were the correct, for the entities under question. Wherever these Executives felt and found that the classification would get altered amended classification declarations were made and effected. The Commissioner's finding of the classification in the case of `Chillers' to be under Heading 8415 is not found to be correct. Since classification of `chillers' have been upheld by the Tribunal to be under Heading 8418. This would indicate that there can be no mens rea on the part of the Executives concerned with the declarations, as alleged and found by the adjudicating Commissioner. In this view of the matter and the fact that duty reversals for the Modvat credit in the case of inputs sent out for job work but not received within sixty days, which was only a procedural infringement of Modvat Rule, and reversals were made even before the issue of notice. The fact that there is no change in the classification required to be effected in the case of "condensers" this case is found to be a case where there is no requirement to invoke penalty clause on the assessee and or the Executives. The penalties as imposed are not upheld.

(e) Since `condensers' classification as arrived at is not upheld and condensers are found to be classified and remain to be classified under Heading 8419, and `chillers' have to be classified under Heading 8418, and no classification and demands under Heading 8418 have been confirmed, the duty demands as made of short payment of duties under 8415, by misclassification of these two goods is required to be not upheld and set aside.

(f) The duty demands on Modvat reversal are confirmed.

(g) The penalties on the Executives and the assessee cannot be upheld and are to be set aside.

3. In view of the findings above, these appeals are allowed in the above terms.

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