Judgment:
1. The first petitioner is a Company registered under the Companies Act, 1956 while the second petitioner is an official of the said Company. The first petitioner will hereinafter be referred to, for the sake of convenience, as 'the Company'. The Company is engaged, among other things, in the manufacture of airconditioners and water-coolers at a factory situated at Thane near Bombay. By an order dated 28th of July, 1972 the Superintendent of Central Excise, Range I, Thane, informed the Company that the Industrial Fans (Blowers) manufactured by the Company in its factory for use in its airconditioners and water-coolers attracted duty under Tariff Item No. 33(2) after taking into consideration the various points which had been urged on behalf of the Company in reply to a notice issued to it earlier by the said authority. The Company was, therefore, asked to obtain L4 licence for the same and pay duty for the period from 29th May, 1971.
2. The Company preferred an appeal an the Appellate Collector of Central Excise, Bombay, allowed the said appeal holding that the combination of impellers and electric motors in the process of assembling of airconditioners and water-cooler are not electric fans falling under Item 33 of the First Schedule to the Central Excises and Salt Act because, as the Appellate Collector said, such fans are not known in the market as electric fans. The Appellate Collector further held that the impellers and motors brought in by the Company were in the nature of component parts for airconditioners and water-coolers and the combination of these two in the process of assembling of airconditioners and water-coolers would not bring these combinations within the scope of Item 33 of the said Schedule. Therefore, the Appellate Collector held that 'the combination of impellers and motors which has been referred to as 'blowers (industrial fans)' by the Superintendent does not fall within the scope of Item 33 of the said (first) Schedule'. This he did by his order dated 22nd November, 1974.
3. The Government of India, in exercise of its powers of revision under Section 36(2) of the Central Excises and Salt Act, hereinafter referred to as 'the Act', issued a notice asking the Company to show cause why the order passed by the Appellate Collector should not be revised. The Company gave its reply and after giving a hearing to the Company the Central Government, by its order dated 26th of September, 1980, set aside the order of the Appellate Collector and purported to restore the order of the Superintendent, which was the authority of first instance. It has already been mentioned above that the Superintendent of Central Excise, Thane, being the authority of first instance, has classified the item in question under sub-item (2) of Item 33 of the First Schedule to the Act, but the Central Government, in exercise of its revisional jurisdiction, purporting to restore the order of the Superintendent, classified the said item under sub-item (3) of Item 33. Even then the Government proceeded to state that the order passed by the 'Assistant Collector' shall get restored. This is obviously a petitioner and some arguments have been advanced by Mr. Taleyarkhan appearing in support of the petition. However, I have not thought it necessary to examine them because on the basic question as to whether the item in question is covered by Tariff Item 33 at all, Mr. Taleyarkhan is on sound ground. Aggrieved by the aforesaid order, the Company has approached this Court under Article 226 of the Constitution of India.
4. After the petition was filed, two demand notices dated 14th October, 1981 and 15th July, 1982 in the sum of Rs. 59.04 lakhs and Rs. 8.27 lakhs respectively were also issued to the Company. The said notices are also challenged in this petition by a subsequent amendment made to the petition.
5. Though appearance has been filed on behalf of the respondents, no return has been filed and, unfortunately, nobody has also appeared for them at the time of the hearing of this petition. Mr. Taleyarkhan, however, has taken me through the petition and all the orders passed in the case. After having gone through the same I have no difficulty in upholding the contention made on behalf of the petitioners that the impugned order suffers from a non-application of mind requiring interference by this Court under Article 226 of the Constitution. In order to appreciate the controversy it would be necessary to briefly refer to the nature of the product manufactured by the petitioner Company. Paragraph 2 of the petition describes how airconditioners and water coolers are manufactured. Some of the essential parts of airconditioners and water-coolers are impellers, also called blowers, motors and propellers. The Company purchases the said parts from different independent suppliers and then fits the same together with other parts into the airconditioners and water-coolers manufactured by it. The function of these parts has also been described in sufficient details in paragraph 2 of the petition. It is sufficient to note that what has been characterised as an electric fan by the reviewing authority consists not merely of propellers but of an entire unit consisting of the propeller motor assembly which is used by the Company in the manufacture of the airconditioners and water-coolers. If merely the propellers, which consist of blades, had been classified as an electric fan, the question would have been examined in that light, but the authorities concerned have proceeded to treat an entire unit, of which the propeller is only a part, as an electric fan. The question is whether this view taken by the authorities can be sustained.
6. It has been argued by Mr. Taleyarkhan that one must approach this question on the basis of the meaning normally assigned to the product either in the general trade or business or as it is normally understood by persons who use electric fans. If one adopts this approach it is easily seen, says Mr. Taleyarkhan, that the electric fan which forms a part of the unit used in the airconditioning machine cannot be characterised as electric fan at all. I am reluctant to adopt the approach which has been suggested by Mr. Taleyarkhan because in a given case it is possible for the Parliament to include for the purpose of levying excise duty in the Tariff Items products such as electric fans normally so understood in common parlance by describing that item in a manner which would be liable to excise duty under the Act. In the instant case that method seems to have been adopted by the authorities because sub-item (2) of Item 33 is in the following terms :-
'Electric fans, designed for use in an industrial system as parts indisponsable for its operation and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose.'
But it is not necessary to uphold this contention of Mr. Taleyarkhan in order that he should succeed in this petition because his other argument that the reviewing authority erred in treating the entire unit as an electric fan is patently correct.
7. At this stage it is necessary to briefly refer to the opinion of a person, who can be regarded as an expert in this respect. An affidavit sworn by one Indravadan Chimanlal Parikh has been relied upon by the petitioner Company before the authorities below and also before me. Mr. Parikh is a qualified electrical and mechanical engineer having, at the time when he sworn the said affidavit in the year 1980, 27 years' experience in the design, construction, sales and services of airconditioning and refrigeration plants and ventilation equipment. He has observed from the show cause notice issued to the Company by the Central Government that the Central Government was of the tentative view that the assembly of motor and impeller used in the manufacture of airconditioners and water-coolers by the Company fell within the Tariff Item No. 33(3) on the grounds that the impellers and motors used in the end products make one single assembly, which is an electric fan and that the fans are intended for fitting to the end products such as room airconditioners and water-coolers. He also observed that the Central Government seemed to be of the opinion that since the motor and impeller blow or circulate air and thus serves the purpose of a fan, it should be regarded as an electric fan. Mr. Parikh has given an opinion that the motor and propeller do not form a fan capable of a viable existence of its own even with a separate stand or mounting system. The said assembly forms an indivisible part of the airconditioner. He has also proceeded to describe the entire structure of the airconditioning machine and has pointed out that the unit which was being treated by the authorities as an electric fan is not capable of an independent existence except as a part of an airconditioning machine.
8. It should also be noted that the reviewing authority relied upon Chapter 84.11 of the Brussels Tariff Nomenclature, part of which has been reproduced in the order of the reviewing authority :-
'These machines, which may be fitted with integral motors or not, are designed either for delivering large volumes of air or gas at relatively low pressure or merely for creating a movement of the surrounding air.'
Mr. Taleyarkhan has, naturally, made a grievance that the reviewing authority relied upon only a part of Chapter 84.11 when, according to him, the said Chapter read as a whole would show that the item in question cannot be treated as an electric fan at all. The other part of Chapter 84.11 of the Brussels Tariff Nomenclature, which was ignored by the reviewing authority, has been reproduced in paragraph 4 of the petition. It mentions that the machines which are designed for delivering large volumes of air or gas at relatively low pressure may act as air extractors or as blowers consisting of a propeller or blade-type impeller revolving in a casing or conduit. The second type of machines, which are normally used for creating movement of the surrounding air, are of a simpler construction consisting merely of a driven fan rotating in free air. Electric fans for room ventilation are, however, excluded. The heading of electric fans excludes fans and blowers fitted with elements additional to their motors or housing if such elements give them the characteristics of more complex machines falling within other headings such as airconditioners etc. It is obvious, therefore, that the item which is being treated as an electric fan by the reviewing authority is not an electric fan at all as per Chapter 84.11 of the Brussels Tariff Nomenclature upon a part of which alone the reviewing authority wrongly placed reliance. If the reviewing authority had read the said Chapter in its entirety, it would not have, in my opinion, committed the error, which it did, because the said Chapter specifically mentions that the unit when used in a machine of the type of an airconditioner cannot be treated as an electric fan.
9. Further no explanation has also been offered in the impugned order as to how an impeller motor assembly as a whole, which includes a fan, can be treated as an electric fan. The reliance placed by the reviewing authority on Chapter 84.12 of the Brussels Tariff Nomenclature is also, in my opinion, misplaced because that 'Chapter describes what an airconditioning machine is and it says that an airconditioning machine may be equipped with a motor driven fan or blower and designed to change the temperature. One is not able to appreciate how the description of an airconditioner, which includes a motor driven fan or a blower, can give a safe guidance to decide as to whether an impeller motor assembly is an electric fan or not. Considered from either point of view, the view taken by the reviewing authority discloses a patent error of law and the order based upon such a view is thus liable to be set aside.
10. Mr. Shankarramakrishnan, on behalf of the respondents, interrupted the flow of my judgment in the midst and submitted that this matter should be adjourned. This is a strange way of asking for an adjournment when neither at the time when the matte was called out nor when I started dictating the judgment anybody appeared for the respondents. It is only when the judgment had gone half-way through that a motion was made for adjournment. Obviously, such an adjournment could not be granted, and was not granted.
11. In the result, this petition must succeed. Rule is made absolute in terms of prayer Clause (a). In view of the fact that none appears for the respondents, there will be no order as to costs in this petition.