2017 (6) TMI 809 - AT - Central Excise

Valuation - includibility - whether the ducting which is a sub system of a central air conditioning system is liable to central excise duty? - Held that - the ducts are prepared and assembled to facilitate carrying cool air from the air handling apparatus. Such ducts become a part of the complete central air conditioning plant which is an immovable property - reliance placed in the case of SUVIDHA ENGINEERS (INDIA) LTD. Versus COMMISSIONER OF C. EX., DELHI 2004 (3) TMI 307 - CESTAT, NEW DELHI , where it was held that erection of ducts etc. at site could not be considered excisable goods - appeal rejected - decided against Revenue.

Summary

Issues involved: Whether ducting, as a sub system of a central air conditioning system, is liable to central excise duty.

The judgment revolves around the issue of whether ducting, which is a sub system of a central air conditioning system, is subject to central excise duty. The appellants, known for manufacturing air conditioning equipment, undertake design, supply, erection, and commissioning of Central Air conditioning Plants. The central issue is whether ducting, a component of the air conditioning system, is liable to central excise duty. The original authority held that excise duty is payable on ductings, leading to a duty demand of &8377; 27,96,497/- along with penalties. The Commissioner (Appeals) set aside the demand, prompting the Revenue to appeal the decision.

During the proceedings, the Learned Departmental Representative (D.R) supported the original authority's findings and cited a Tribunal decision asserting central excise duty liability on ducts for air conditioning systems. Conversely, the respondent's counsel justified the impugned order, contending that ducts, when assembled during the installation process, become part of the central air conditioning plant, which is immovable property, thus not subject to duty. The counsel referenced a Tribunal decision favoring this stance, aligning with the Supreme Court's view that erection of ducts on-site does not constitute excisable goods.

The Commissioner (Appeals) based the decision on the CESTAT's ruling in the case of Suvidha Engineers (India) Ltd., emphasizing that ducting work at the site does not amount to fabrication in a factory and is not considered excisable goods. The Commissioner referred to various judgments, including those of the Supreme Court, to support the conclusion that ducts forming part of the central air conditioning system do not qualify as excisable goods. The Tribunal found no reason to interfere with the Commissioner's decision, upholding it as consistent with established legal principles.

Ultimately, the Tribunal upheld the impugned order, dismissing the Revenue's appeal. The decision reaffirmed that ducting, as part of a central air conditioning system, does not attract central excise duty, aligning with legal precedents and settled law.