2007 (5) TMI 36 - AT - Customs

Classification Revenue contended that appellant good (heat pumps) is to be considered as air conditioner and classifiable under CH 8415 without benefit of Notification 30/88 Held that the contention was right and accordingly classified it under Ch 8415

Issues Involved:

1. Classification of imported goods.
2. Eligibility for exemption under Notification 30/88.
3. Confiscation under Section 111(m) for mis-declaration.
4. Validity of import license and remand for fresh examination.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:

The appellants, M/s Hotel Leela Venture, filed a bill of entry for 168 units declared as Daikin Air Heat Pumps, seeking classification under Chapter Heading 841868 of the Customs Tariff. The goods were examined and reclassified as air-conditioning machines under Chapter Heading 8415, without the benefit of Notification 30/88. The Commissioner relied on the HSN Explanatory Notes which define air-conditioning machines as those comprising a motor-driven fan and elements for changing temperature and humidity, including machines where humidity cannot be separately regulated. The appellants contended that their machines did not have a humidity regulation element and should not be classified as air-conditioning machines. However, the HSN Explanatory Notes clarified that machines changing humidity by condensation are included under Chapter Heading 8415. The Commissioner's classification was upheld, noting that the imported machines matched the description in the HSN Explanatory Notes and were not heat pumps as per Chapter Heading 8418.

2. Eligibility for Exemption under Notification 30/88:

The appellants argued that even if classified under Chapter Heading 8415, the machines should be eligible for exemption under Notification 30/88, which covers "heat pumps for space heating, water heating, cooling application" without specifying a chapter heading. They cited various technical definitions and literature to support their claim that air-conditioners are a type of heat pump. However, the Tribunal found that the goods were commonly understood and described as air-conditioners, not heat pumps. The Commissioner did not recognize them as reversible heat pumps, and the appellants' acceptance of classification under Chapter Heading 8415 for 8 units further weakened their claim. The Tribunal concluded that the machines were not eligible for the exemption under Notification 30/88.

3. Confiscation under Section 111(m) for Mis-declaration:

The Tribunal noted that the appellants had previously imported similar machines described as air-conditioning machines, which were re-exported at their request. The subsequent importation of the same model with a description as heat pumps was seen as a deliberate attempt to avail the exemption notification. This mis-declaration was not out of a bona fide belief but a calculated move. Therefore, the confiscation under Section 111(m) of the Customs Act, 1962, was upheld.

4. Validity of Import License and Remand for Fresh Examination:

Since the goods were classified as air-conditioners, the advance license produced by the appellants was not considered valid for their import. However, the appellants produced a new license covering the already imported goods. As this license was not presented before the Commissioner, the matter was remanded to the Commissioner to examine its validity. The Tribunal instructed that the order regarding redemption fine and penalty would depend on the Commissioner's findings on the new license.

Summary of Findings:

1. The goods are classified under Chapter Heading 8415 as air-conditioning machines.
2. The machines are not eligible for exemption under Notification 30/88 dated 1-3-1988.
3. Confiscation under Section 111(m) for mis-declaration is upheld.
4. The matter is remanded to the Commissioner to determine the validity of the new license produced for the imported goods. The order regarding redemption fine and penalty will be based on the Commissioner's findings.

Conclusion:

The appeal is disposed of with the above findings and remand instructions. (Pronounced in Court on 28-5-07)

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