2000 (7) TMI 645 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for concessional rate of duty under Notification No. 166/86.
2. Correct cooling capacity of the package air-conditioners (PACs).
3. Validity of the evidence and statements used by the Department.
4. Relevance and accuracy of expert affidavits.
5. Methodology for calculating cooling capacity.
6. Requirement of deducting power input in cooling capacity calculation.
7. Imposition of penalty and confiscation of goods.

Detailed Analysis:

1. Eligibility for Concessional Rate of Duty:
The appellants, engaged in manufacturing package air-conditioners (PACs), availed concessional duty rates under Notification No. 166/86. The notification initially exempted air-conditioners with capacities between 3 to 7.5 tonnes from duty exceeding Rs. 1500 per unit, later amended to Rs. 3300 per unit. The Department contested that the PACs exceeded 7.5 tonnes, making them ineligible for the concessional rate.

2. Correct Cooling Capacity of PACs:
The Department's evidence, including quality control reports and statements from the Quality Control Inspector and Deputy General Manager, indicated that the PACs had capacities ranging from 8 to 12.5 tonnes. The appellants argued that their tests were not for ascertaining cooling capacity but merely to check component functionality. They contended that the formula used by the Department was incorrect and that they did not mis-declare the capacity.

3. Validity of Evidence and Statements:
The quality control reports maintained by the appellants and the statements from Shri M.V. Dekhane and Shri D. Ravindra were pivotal. The reports were used to calculate the tonnage of PACs using a specified formula. The statements confirmed that the cooling capacity was derived from these tests. The appellants' argument that the reports were unreliable due to the inspector's lack of qualifications was dismissed, given his extensive experience and role in quality control.

4. Relevance and Accuracy of Expert Affidavits:
The affidavits from Shri H.P. Dessa and Shri P.C. Malkani, members of the Refrigeration and Air-conditioning Sectional Committee, were examined. Both experts highlighted the lack of proper testing facilities as per IS: 8148-1976. However, their affidavits did not conclusively determine the actual cooling capacity of the PACs. The Commissioner deemed these affidavits irrelevant for resolving the dispute, as they did not provide a definitive answer regarding the PACs' capacity.

5. Methodology for Calculating Cooling Capacity:
The appellants argued that the cooling capacity should be verified using two simultaneous methods, as per IS: 8148-1976, and the average of these methods should be considered. They claimed that the total power input to the equipment was not deducted during the quality control tests, which would significantly reduce the cooling capacity.

6. Requirement of Deducting Power Input:
The appellants presented a sample quality control report showing reduced cooling capacity after deducting power input. The formula in clause 5.2.1 of IS: 8148-1976, which includes deducting power input, was highlighted. This aspect was not previously considered by the adjudicating authority, making it a crucial point for determining the correct cooling capacity.

7. Imposition of Penalty and Confiscation of Goods:
The Commissioner confirmed the demand for duty, imposed a penalty of Rs. 50 lakhs, and ordered the confiscation of seven seized PACs, with an option to redeem them on payment of a fine of Rs. 3 lakhs. The appellants' defense was rejected, leading to this appeal.

Conclusion:
The judgment set aside the impugned order and remanded the case to the Commissioner for fresh adjudication. The Commissioner was directed to consider the technical material regarding the deduction of power input in calculating the cooling capacity. If the cooling capacity is found to be below 7.5 tonnes after deduction, the appellants would be eligible for the concessional rate of duty. If not, the demand for duty and penalty would be confirmed. The Commissioner was instructed to provide a reasonable opportunity for the appellants to present their defense before passing a fresh order. The appeal was allowed by way of remand.