2003 (10) TMI 118 - AT - Central Excise

Air-conditioner - Parts and accessories - Penalty - Whether M/s. Dalphi Automotive Systems Ltd., Appellant Company, are manufacturing complete car air conditioner or parts thereof only - HELD THAT - 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 characterstics 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, u/s 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. 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.

Summary

Issues involved: Determination of whether M/s. Dalphi Automotive Systems Ltd. are manufacturing complete car air conditioners or parts thereof only.

Summary:
The common issue in two appeals is whether the company is manufacturing complete car air conditioners or just parts. The company argued that they supply specific parts for car air conditioners but not all essential components as per a Board Circular. They emphasized that certain key parts were not supplied by them. The Advocate cited relevant case laws to support their argument. The company also highlighted that certain parts were not cleared together and that the value of some components was not considered for duty assessment. They referred to previous Tribunal decisions to support their position on classification and duty assessment.

The Revenue Advocate countered by stating that the Circular in question pertained to split air conditioners and did not apply to car air conditioners. They argued that the company supplied major assemblies with minor parts that constituted a car air conditioning machine, invoking Rule 2(a) of the Interpretative Rules. The Advocate contended that the goods manufactured were not parts based on the definition in the EXIM Policy and that penalties under Section 11AC could be imposed for misdeclaration.

After considering both arguments, the Tribunal referred to the Board Circular specifying essential elements of an air conditioning machine. They directed the matter back to the Adjudicating Authority to verify if all specified parts in the Circular were supplied by the company. They clarified that if all components were supplied, it would be classified as a complete air conditioning machine; otherwise, it would be considered as parts. The Tribunal ruled out penalties under Section 11AC and Rule 209A due to the interpretative nature of the issue.

In conclusion, one appeal was allowed, and the other was remanded for further assessment based on the Circular's criteria for classification.