| SooperKanoon Citation | sooperkanoon.com/32659 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Oct-14-2003 |
| Judge | A T V.K., P Chacko |
| Reported in | (2004)(92)ECC651 |
| Appellant | Delphi Automotive Systems |
| Respondent | Commissioner of C. Ex. |
2. Sh. K.K. Anand, learned Advocate, submitted that the Appellant Company, besides manufacturing auto parts, manufacture parts required for the manufacture of air-conditioning machines to be fitted in the cars; that apart from parts of air-conditioning system, they also supply compressor; that the parts are mainly supplied to M/s. Daewoo Motors India Ltd. and M/s. General Motor India Ltd.; that buyers also procure many parts from other sources and then use all these parts in a particular car, which makes the air-conditioner functional; that the Commissioner, under the impugned order applying Rule 2(a) of the Interpretative Rules has held that the goods supplied by appellants from their factory and warehouse had acquired the essential character of a car air-conditioning machine. The learned Advocate, further, submitted that they were supplying parts as under : (i) For Matiz Car - Compressor, condenser, cooling unit, heating unit and evaporator.
(ii) For Ceilo Car - Compressor, Condenser, Receiver drier/acumulator air inlet/blower, cooling unit, heating unit and evaporator.
(iii) For Opel Astra - Compressor, Condenser and evaporator along-with office Tube/TXV.He emphasised that for the manufacture of air-conditioner, there are several other parts which are required, which are around 17 in number, which are not supplied by them; that without the supply of these parts, it cannot be said that the machine acquires essential character of air-conditioning machine. He relied upon Central Board of Excise & Customs Circular No. 666/57/2002-CX., dated 25-9-2002 wherein it has been clarified by the Board that the essential elements of an air-conditioning machine would be the following : The Board also clarified that "if an assembly or a kit (even CKD or SKD form) does not have all the above components, it will not be considered to have the essential characteristics of an air-conditioning machine and will be classified as parts." 3. The learned Advocate mentioned that the appellants are only supplying parts mentioned at serial Nos. (i), (ii), (iv) and (v) in the circular; that they are not supplying parts mentioned at Serial Nos.
(iii) & (vi), that is, 'motor and capillary line (expansion valve); that in respect of supplies made to M/s. General Motors, they are, in some cases, even not supplying part mentioned at Serial No. (iv) that is fan or blower for circulating the air. He, therefore, contended that in view of Board's Circular, the appellants are not supplying car air-conditioning machine and the goods are to be assessed to duty as parts.
4. The learned Advocate relied upon the decision in the case of Keihin Panalfa Ltd. v. C.C.E., Noida, 2003 (151) E.L.T. 367 (T) wherein in view of the fact that the assessee was not supplying heater assembly, blower assembly, etc. the Tribunal has held that all the essential elements of air conditioning machines are not being supplied and according to Board's Circular, the assembly supplied by the assessee will be clarified as parts. Reliance has also been placed on the decision in the case of Seagull Fabricators Pvt. Ltd. v. C.C.E., 2001 (127) E.L.T. 186 (T). The learned Advocate also mentioned that the appellants do not clear all the parts together under one invoice; that condenser and BAI (Blower Air Inlet) are supplied to M/s. General Motors India Ltd. from their trading warehouse and HEA (heater evaporator assembly) to M/s. Daewoo Motors is supplied from the warehouse; that the Department has also not taken the value of these components into consideration for demanding the Central Excise duty; that the clearance of some parts from the trading warehouse has nothing to do with the manufacturing activity. He relied upon the decision in the case of Jyoti Overseas Ltd. v. C.C.E., Indore, 2001 (130) E.L.T.446 (T-LB) = 2001 (44) RLT 37 (CEGAT-LB), wherein the Larger Bench of the Tribunal has held that "subsequent use to which it was put by the dealer can have no relevance to the classification for fixing assessable value to decide the duty payable on the goods. Reliance has also been placed on the decision of the Larger Bench of the Tribunal in the case of Sony India Ltd. v. C.C., I.C.D., New Delhi, 2002 (143) E.L.T. 411 (T-LB) = 2002 (50) R.L.T. 885 (CEGAT-LB) and Netlon India Ltd. v. C.C.E., Vadodara, 2000 (121) E.L.T. 675 (T) = 2000 (40) R.L.T.429 (CEGAT) wherein it has been held by the Tribunal that Rule 2(a) of Interpretative Rules can be invoked only when the goods cannot be classified in terms of the Tariff Heading, Section and Chapter Notes; that in the present matter, the goods are clearly classifiable under Heading 84.15 of the Schedule to the Central Excise Tariff Act in view of Note 2 of Section XVI of the Tariff and classification of the impugned goods can be determined in terms of Rule 1 of the Interpretative Rules. Reliance has also been placed on the decision in Sanden Vikas (India) Ltd. v. C.C.E., New Delhi, 2003 (153) E.L.T. 3 (S.C.).
5. Finally, the learned Advocate mentioned that show cause notice dated 4-4-2001 has been issued for normal period of limitation and accordingly penalty under Section 11AC of the Central Excise Act is not imposable; that even otherwise, Proviso to Section 11A is not attracted inasmuch as goods were duly declared in the declaration filed by them under Rule 173B of the Central Excise Rules and in the invoice; that as such there was no suppression; that moreover, the Range Superintendent, under letter dated 15-2-2001, has treated the clearance of the goods effected by them as parts of air conditioner as he demanded Special Excise duty on air-conditioner parts cleared before 6-3-2000; that no penalty under Rule 209A of the Central Excise Rules, 1944 is imposable on Shri Dinesh Chabbra, Chief Financial Officer of the Appellant Company as he had been made authorised signatory for excise matters only with effect from February, 2001 and he had joined the company only on 22-11-2000; that there is absolutely no evidence to show that he knew or had reason to believe that the goods cleared by the Appellant Company were liable to confiscation. He relied upon the decision in Z.U. Alve, G.M. BHEL v. C.C.E., Bhopal, 2000 (117) E.L.T. 69 (T) = 2000 (36) R.L.T. 721 (CEGAT).
6. Countering the arguments, Sh. N.K. Bajpai, learned Advocate for Revenue, submitted that the Circular dated 25-9-2002 is in relation to split air-conditioner as it refers to Board's Circular No.231/65/96-CX., dated 12-7-96 wherein it was clarified that units and parts are not one and the same thing and that units of split air-conditioner when cleared separately will not be eligible for concessional rate of duty available to the parts of the air-conditioner under Notification No. 56/95-C.E., dated 16-3-1995; that the decision in the case of Keihin Panalfa Ltd., (supra), will also not apply to the facts of the present matter as in the said case, Rule 2(a) of the Interpretative Rules was not invoked whereas in the present matters the same has been invoked; that the circular issued in 2002 does not apply to car air-conditioner which is apparent from paragraph 6 of the Circular which contained the conclusion as under : "It also then stands to reason that both the units of a split air conditioner are nothing but 'parts' of an A.C." 7. Learned Counsel, further, submitted that the appellants in the present matters are supplying items of major assemblies from their factory and from their trading warehouses; that these assemblies put together with some minor parts have the essential character of car air conditioning machine; that thus Rule 2(a) of the Interpretative Rules is squarely applicable in these matters. He also contended that the impugned goods cannot be treated as parts in view of the definition of parts in para 7.8 of EXIM Policy according to which part is an element of sub-assembly or assembly not normally useful by itself and not amenable for further disassembly; that the goods manufactured by the appellants are assemblies which contain a number of components/parts and they can perform their function when fitted with other parts/assemblies and are amenable to further disassembly; that the said definition has been taken from Mc Graw Hill Dictionary of Scientific and Technical Terms. He also mentioned that penalty under Section 11AC of the Central Excise Act can be imposed even when the show cause notice has been issued for the normal period if there is a suppression of facts, wilful mis-declaration, fraud, etc.; that as the appellants had misdeclared their products as parts of car air-conditioner, penalty under Section 11AC of the Act is imposable on them; that penalty is also imposable on Sh. Dinesh Chabbra as he supervises the work relating to Central Excise; that Rule 209A of the Central Excise Rules, 1944, is very wide in its coverage as it covers 'any person' dealing with any excisable goods which he knows or has reason to believe are liable to confiscation.
8. In reply, the learned Advocate for the appellants, mentioned that Circular dated 25-9-2002 is applicable to all types of air-conditioners, including car air conditioner; that in the decision in the case of Universal Commercial Corporation v. C.C., Delhi, 1994 (69) E.L.T. 150 (T), the Tribunal has considered as to what would constitute the essential parts of an air-conditioning machine; that decision pertains to general air-conditioner and not to split air-conditioner; that the circular dated 25-9-2002 has been issued by the Central Board of Excise & Customs on the basis of said decision as the appeal has been dismissed by the Supreme Court.
9.1 We have considered the submission of both the sides. The Board, after referring to two decisions in the case of Universal Commercial Corporation v. C.C., Delhi,(T) and C.C.E., v.Subros Ltd., 1989 (43) E.L.T. 543 (T) has clarified, in Circular No.666/57/2002-CX., dated 25-9-2002, that the essential elements of an air-conditioning machine would be the following : 9.2 The circular, further, clarifies that "if an assembly or a kit (even in CKD or SKD form) does not have all the above components, it will not be considered to have the essential characteristics of an air-conditioning machine and will be classified as 'parts'." The Board has, further, clarified as under : "a sub-assembly or an assembly, which does not have the essential characteristics of the complete machinery, will be classified as 'part' of an air-conditioning machine and will be eligible for concessional rate of duty under the exemption notification (now Notification No. 6/2002-C.E., dated 1-3-2002 - Sl. No. 197)." 9.3. In the case of Keihin Panalfa Ltd., supra, the Tribunal has held that the said circular is applicable to car air-conditioning machine by observing as under : "The Board, under the said circular, has clarified as to what constitutes the essential elements of an air-conditioning machine and an assembly not having all the said components cannot be claimed to have the essential characteristics of an air-conditioning machine." 10. In view of the Circular dated 25-9-2002, it is only to be determined as to whether the appellants are supplying all the parts mentioned in the Circular to their customers, whether from factory or from trading warehouse. As the said circular was not before the Adjudicating Authority at the time of passing the impugned order, the matter has to go back to him for verifying whether all the parts specified in the circular are supplied by the appellants. If they supply all these components, the same will be considered to have the essential character-sties of the complete air-conditioning machine and will be classified as such otherwise these will be classified as 'parts' only. Before parting with the matters, we hold that the penalty, under Section 11AC of the Central Excise Act is not imposable on the Appellant Company as the issue involved is one of interpretation and application of Rule 2(a) of Interpretative Rules. Further, for the same reason, no penalty is imposable on Sh. Dinesh Chabbra under Rule 209A of the Central Excise Rules. Thus the appeal, filed by him (E/584/2002-B) is allowed.
11. Appeal No. E/585/2002-B, filed by the Appellant Company is remanded to the jurisdictional Adjudicating Authority for deciding the matter afresh as per direction contained in paragraph 10 of the order.