2006 (8) TMI 27 - AT - Central Excise

Central Excise All parts of car air conditioning machines manufactured by appellant except compressor and motor Parts manufactured by appellants to be assessed as parts and not as car air conditioning machine Demand, interest and penalty set aside

Summary

Issues Involved:
1. Classification of the goods cleared by the assessee.
2. Applicability of Notification No. 22/2000-CE for exemption.
3. Allegation of suppression of facts with intent to evade duty.
4. Whether the assessee manufactured a complete air-conditioning machine.
5. Imposition of duty, interest, and penalties.

Detailed Analysis:

1. Classification of the Goods Cleared by the Assessee:
The primary issue was whether the parts supplied by the assessee should be classified as a complete air-conditioning machine or as parts of such a machine. The assessee argued that they supplied individual parts based on customer orders and that these parts were not assembled into a complete air-conditioning machine at their premises. The Tribunal noted that the parts were supplied in a loose condition and were not assembled together at the time of supply.

2. Applicability of Notification No. 22/2000-CE for Exemption:
The assessee claimed exemption under Notification No. 22/2000-CE, which was available to parts of air-conditioning machines. The Revenue contended that the clearances should be classified as complete air-conditioning machines and thus not eligible for the exemption. The Tribunal found that the assessee did not manufacture compressors or motors, which are essential components of an air-conditioning machine. Therefore, the parts supplied did not constitute a complete air-conditioning machine, and the exemption was applicable.

3. Allegation of Suppression of Facts with Intent to Evade Duty:
The notice issued to the assessee alleged suppression of facts with the intent to evade duty, citing the use of unique terminology and failure to indicate amendments to classification declarations. The Tribunal, however, found that the nomenclature used by the assessee was based on customer orders and practical aspects. There was no deliberate intent to mislead the Department.

4. Whether the Assessee Manufactured a Complete Air-Conditioning Machine:
The Tribunal examined whether the assessee could be considered to manufacture a complete air-conditioning machine by applying Rule 2(a) and Note 4 to Section XVI. It was concluded that without the manufacture of compressors and motors, the assessee could not be said to manufacture a complete air-conditioning machine. The Tribunal referenced the Board's Circular No. 666/57/2002-CX, which stated that if an assembly or kit does not have all essential elements, it cannot be considered a complete air-conditioning machine.

5. Imposition of Duty, Interest, and Penalties:
Given the findings that the assessee did not manufacture a complete air-conditioning machine and that the exemption under Notification No. 22/2000-CE was applicable, the Tribunal set aside the duty demands, interest, and penalties. The Tribunal also noted that since no air-conditioning machine came into existence, the plea of bar of limitation and other related pleas did not need to be addressed.

Conclusion:
The Tribunal set aside the duty demands, interest, and penalties imposed on the assessee. The appeals were allowed, and it was pronounced in Court on 30.08.2006.