2015 (7) TMI 96 - SC - Central Excise

Classification of car air-conditioning kit - Legal substantiality of the judgment and order of tribunal based on Apex court judgment in past - Matter refer to three judge bench for hearing - Whether the car air-conditioning kit is classifiable under item No. 3 or under Item No. 8 of the table to the said Notification No. 166/86-C.E., dated March 1, 1986? - Held that - The Division Bench has quite categorically stated that if the air-conditioning kit does not contain automotive gas compressor with or without magnetic clutch, duty is paid as per item no.8 and if it contains the automotive gas compressor with or without magnetic clutch, it will not come under item no.8 In our view, the ratio laid down in the said decision cannot be found to be erroneous but as a matter of clarification, we say that if a kit and compressor are sold in a singular invoice or in one pricing, it will go out of item no.8 and duty will be paid separately, but if there are two invoices for separate pricing, the air-conditioning kit would come under serial no.8 and the automotive gas compressor with or without magnetic clutch will be liable to duty separately. We may hasten to clarify that if there is a combined sale, which serial item it will fall, being not necessary in this case, we are not inclined to dwell upon the same. We have only clarified the two-Judge Bench decision in Sanden Vikas (India) Ltd. 2003 (3) TMI 97 - SUPREME COURT OF INDIA to the above effect. Coming to the case at hand, it is the case of the appellant that the respondent-assessee has sold the kit and compressor separately and that position having been accepted by the tribunal, we do not find any error in the order passed by the authorities and the Tribunal. - Decided against the revenue.

Issues Involved:
1. Applicability of the decision in Sanden Vikas (India) Ltd. v. C.C.E., New Delhi.
2. Interpretation of Notification No. 166/86-CE and its amendments.
3. Classification of car air-conditioning kits and automotive gas compressors under the Central Excise Tariff Act.
4. Relevance of Rule 2(a) of the Rules of Interpretation and Section Note 4 to Section XVI.
5. Applicability of Circular No. 479/45/99-CX dated 17.8.1999.

Detailed Analysis:

1. Applicability of the Decision in Sanden Vikas (India) Ltd. v. C.C.E., New Delhi:
The Tribunal relied on the decision in Sanden Vikas (India) Ltd. v. C.C.E., New Delhi, which concerned the classification of car air-conditioning kits under Notification No. 166/86-CE. The Supreme Court noted that the decision in Sanden Vikas (India) Ltd. was between the same parties but for a different period. The present appeal was concerned with the period 1.8.1991 to 28.2.1993. The Court examined whether the interpretation in Sanden Vikas (India) Ltd. required reconsideration.

2. Interpretation of Notification No. 166/86-CE and Its Amendments:
The Court scrutinized Notification No. 166/86-CE, especially the amendments made by Notification Nos. 75/90-CE and 68/91-CE. The Notification classified various goods and specified different excise duties for gas compressors, air-conditioners, and parts and accessories of car air-conditioners. Explanation (2) to the Notification, inserted on 25.07.1991, excluded car air-conditioning kits containing automotive gas compressors from certain classifications.

3. Classification of Car Air-Conditioning Kits and Automotive Gas Compressors:
The respondent cleared car air-conditioning kits without gas compressors under serial no.8 and automotive gas compressors under serial no.1, paying different excise duties. The revenue argued that the goods should be classified under serial no.3, as per Rule 2(a) and Section Note 4 to Section XVI. The Court noted that car air-conditioning kits and automotive gas compressors are distinct and should be classified separately unless sold as one unit.

4. Relevance of Rule 2(a) of the Rules of Interpretation and Section Note 4 to Section XVI:
Rule 2(a) and Section Note 4 to Section XVI were discussed to determine if they applied to the Notification. Rule 2(a) includes incomplete or unfinished goods under the heading of complete goods if they bear the essential character of the finished goods. Section Note 4 states that a combination of machines intended to contribute to a clearly defined function should be classified under the heading appropriate to that function. The Court concluded that these rules did not apply to the Notification in question, as the Notification intended to maintain a distinction between complete air-conditioners and their parts.

5. Applicability of Circular No. 479/45/99-CX Dated 17.8.1999:
The respondent relied on Circular No. 479/45/99-CX, which clarified that fitting duty-paid parts and components of an air-conditioner in a car does not result in the manufacture of a new excisable item. The Court found that the Circular, although issued later, clarified the intention of the Notification and supported the respondent's classification.

Conclusion:
The Supreme Court clarified that if a car air-conditioning kit and automotive gas compressor are sold as one unit, they do not fall under serial no.8. However, if sold separately, the kit falls under serial no.8 and the compressor under serial no.1. The Court upheld the Tribunal's decision, finding no error in the classification and excise duty paid by the respondent. The appeal was disposed of with this clarification, and no costs were ordered.

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