Full Judgment
Investigations revealed that the appellants have .a cold-storage plant at Mandapam and Cuddalore. The cold-storage at Palavakkam and the freezing plant at Mandaparn were made up of both purchased parts and parts of air-conditioning machinery manufactured by the appellants. The plant at Palavakkam has two cooling units, one compressure and one condensor. At Mandapam it consists of a freezer of cooling unit, a condensor and two compressors. It was alleged that the appellants had manufactured three cooling units and two condensers without the central excise duty and out of this one condensor and one cooling unit were sent to Mandapam. A show cause notice was issued on 27.10.76 alleging that the appellants had not taken out licence for the manufacture of 3 cooling units and two condensors which are parts of refrigerating and air-conditioning machinery falling under T.I. 29A(3). In reply to the show cause notice the appellants stated that they did not manufacture parts of refrigerating or air-conditioning machinery and that the fabrication was not with the intention for sale. It was intended for their own use and were manufactured at site. The Deputy Collector who inquired into the matter held that the appellants had admitted fabrication of these part's arid that they did so without a licence or payment of duty. The Appellate Collector imposed a penalty of Rs. 750/- and also directed the duty in respect of the goods to be paid.
2. On appeal the Appellate Collector held that the main head of tariff item 29A was refrigerating and air-conditioning appliances and machinery all sorts and parts thereof. Before the Appellate Collector the 'judgment of the Allahabad High Court in the case of Naresh Refrigerating Industries was cited. The Appellate Collector was not inclined to follow that judgment and rejected the appeal.
3. Shri Kunhikrishnan, Consultant, appearing for the appellants submitted that the appellants did not manufacture any air-conditioning or refrigerating machinery and that there was mere fabrication from parts either purchased or made. He submitted that the parts became cooling units or condensers or compressors only when they were sold as parts of an air-conditioning or refrigerating machinery. He relied on the decision of the Allahabad High Court reported in 1980 ELT 600, Mother India Refrigerators. In that ruling the Allahabad High Court has held that Sub-entry (3) of Item 29A took its colour from entries 1 and 2 because of the specific directive of the heading by using the words 'parts thereof and held that these parts though they may be called cooling units and condensers were not liable to excise duty within the meaning of 29A(3) of the Tariff Schedule. In 1984 (17) ELT 125, Ravi Dugdholaya, the Tribunal followed the above ruling. In Vinola Ice Industries, 1984 (17) ELT 214, a similar view was taken by the Tribunal. Shri Kunhikrishnan submitted in Gopal Cold-Storage, 1985 (21) ELT 692, a Bench of the Allahabad High Court has followed the earlier ruling in 1980 ELT 600. He, therefore, submitted that the decision of the authorities below was incorrect.
4. On behalf of the Department Shri H.L. Verma, S.D.R. urged that in Anil Ice Factory, 1984 (15) ELT 333, the Gujarat High Court has considered a similar situation and also a decision reported in (supra).
At page 336, the Gujarat High Court did not agree with the views of the Allahabad High Court and held that the cooling units and condensers squarely fall within the description of 29A(3). This decision was followed by the Tribunal in 1985 (19) ELT 269 (Tribunal), Chibramu Cold-storage and also 1985 (19) ELT 265 (Tribunal), Madan Cold-Storage, Kanpur. Shri H.L. Verma, therefore, urged that there are no merits in the appeal.
5. We have carefully considered the contentions raised by both the parties. The appellants do not dispute the manufacture of the cooling units and condensors. Their main objective is that the items fall outside the scope of 29A(3) because they are not parts ordinarily sold or offered for sale as ready assembled units. It was urged that these items became cooling units or condensors only when they are fitted and Cooled and till then they cannot be called as parts of a refrigerating or air-conditioning machinery. The decision of the Gujarat High Court in 1984 (15) ELT 353, has considered the identical arguments., Hon'ble Gujarat High Court has referred to the caption refrigerating and air-conditioning appliances and machinery all sorts and parts thereof.
With regard to items 1 and 2 we find the words 'which are ordinarily sold or offered for sale as ready assembled units. In respect of 3 the description does not refer to the sale or ready assembled units.
Hon'ble Gujarat High Court has thus taken the view that, the words 'offered for sale' cannot be read into entry 3. We notice that this decision has taken into account the decision of the Allahabad High Court in the case of Mother India Refrigerator. Of course, a Bench of the Allahabad High Court has confirmed that decision in the case of Gopal Cold-storage. However, we are of the. view that the Gujarat High Court has taken into consideration all the aspects of the matter and this decision has also been followed by the Tribunal in two other cases. We also see that in 1985 (22) ELT 184, Collector of Central Excise, v. American Refrigeration Co. the Tribunal following the case of Gujarat High Court' and also the two other decisions of the Tribunal held that the goods were classifiable under T.I. 29A(3). In view of the preponderance of the decisions by the Tribunal following Hon'ble Gujarat High Court we also hold that in view of the ratio of that decision the appellants' contention cannot be accepted.
5. The lower authorities have imposed a penalty of Rs. 750/- on the appellants. In view of the conflict of decisions, we are of opinion that it is not a 'case in which the imposition of penalty is called for. In the result the demand for duty is confirmed and the penalty imposed is Set aside. The appeal is disposed of accordingly.