2005 (9) TMI 5 - AT - Central Excise

Duct for central air-conditioning system comes into existence after fabrication at site and take shape and size of building/plant and becomes part of civil structure

Summary

Issues:
Whether 'ducting' fabricated as an essential feature of a Central Air-Conditioning System for Plants/Buildings during the course of setting up, is excisable under Central Excise Act, 1944, and if so, who would be liable to discharge the duty.

Analysis:

1. The appellants are manufacturers of air-conditioning machinery and undertake erection and commissioning of Air-Condition Plants systems based on work-contracts executed through others. Ducting is essential for distributing air in the system, carrying treated air to designated spaces. Ducts are fabricated at the site, unique to the building/plant, and become part of the civil structure connected with various machines. The ducts are not marketable commodities and are not excisable under the Central Excise Act.

2. The issue of exciseability on ducts fabricated at the site has been debated previously. The Central Excise Board's instruction clarified that integrated systems like air-conditioning plants are not 'goods' in the traditional sense and cannot be compared to individual machines. Ducts, being part of the civil structure and fabricated on-site, are not excisable goods. The duty demand on such ducts is not justified.

3. The appellants argued that ducting is not dismantlable, cannot be moved without damage, and is not a marketable product listed in the Tariff. The instructions from the Central Excise Board further support the non-excisability of ducts, considering them as part of the civil structure. The duty demand, in this case, should not be imposed on the appellants.

4. The duty demand, if applicable, in the case of job work, would fall on the job worker, not the manufacturer. The classification of ducts has been inconsistent, with different interpretations by different Commissioners, indicating a lack of clarity. The appeal should be allowed, setting aside the order to ensure uniform classification and no duty demand on the appellants.

5. Considering the non-excisability of the ducts and the inconsistencies in classification, no penalty or additional liability under the Central Excise Act should be imposed on the appellants. The orders demanding duty and penalties are not justified, and the appeals should be allowed, setting aside the previous decisions.

In conclusion, the Appellate Tribunal held that the ducting fabricated on-site as part of a Central Air-Conditioning System is not excisable under the Central Excise Act. The duty demand on the appellants was deemed unjustified, and no penalties or additional liabilities should be imposed. The orders demanding duty were set aside, and the appeals were allowed.