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2019 (10) TMI 798 - AAR - GSTClassification of goods - Air Handling Unit - Ventilation Unit - whether classifiable under 8414 80 90 or under 8445 90 00? - HELD THAT - The Air Handling Unit is admittedly used in the Central Air conditioning System and has temperature control and definitely would fall under 8415 which relates to Air Conditioning machines, comprising of motor driven and elements for changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated. The parts are covered under 8415 90 00 and hence there is a specific entry defining the Parts of Air Conditioning machines, comprising of motor driven and elements for changing the temperature and hence the Air Handling Units supplied by the applicant would squarely fall under the HSN 8415 90 00 and not under a general entry 8414 80 90. It is observed that the Ventilation Unit found to have a Pre-filter Section Fan section and Controls and does not have any temperature control. The Ventilation Unit can be supplied independently of the Air conditioning unit, and would consist of exhaust. The applicant states that the Air Ventilation Unit only has exhausting facility and removes the old air and fresh air is brought in from outside after filtration, The same involves fans and these fans blow the air out and creates a vacuum in the area and this vacuum is filled by the fresh air from a different source which passes through filters. Hence this allows Circulation of air and hence is an Air Circulator which is covered under HSN 8414 59 10 which deals with Fans which are air circulators. The Air handling units which are supplied by the applicant is classified under HSN 8415 90 00 - Air Ventilators which supplied by the applicant is classified under HSN 8414 59 10.
Issues Involved:
1. Classification of Air Handling Units (AHU) under HSN 8414 80 90 or HSN 8415 90 00. 2. Classification of Ventilation Units under HSN 8414 80 90 or HSN 8415 90 00. Detailed Analysis: Issue 1: Classification of Air Handling Units (AHU) The applicant, engaged in the manufacture and distribution of AHUs and Ventilation Units, sought to classify AHUs under HSN 8414 80 90. AHUs are used in central air conditioning systems for regulating air flow and temperature control. The applicant argued that AHUs should be classified under HSN 8414 80 90, which pertains to "Air or vacuum pumps, air or other gas compressors and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted with filters." The applicant cited Entry No. 317B of Schedule III of Notification No. 1/2017 dated 28.06.2017 and Section Note No. 2(a) of Section XVI of the Customs Tariff Act, which states that parts included in any headings of Chapter 84 or 85 are to be classified in their respective headings. The applicant contended that AHUs, having independent functions, should not be classified as parts of air conditioners under HSN 8415 90 00. During the personal hearing, the applicant reiterated that the end use of the product should not determine its classification, referencing the Supreme Court case Indian Aluminium Cables Ltd v. Union of India and Others. They emphasized that AHUs perform air treatment functions, including heating, cooling, humidifying, dehumidifying, filtration, and energy recovery, and thus should be classified under HSN 8414 80 90. The Authority for Advance Ruling (AAR) considered the submissions and examined the relevant HSN codes. HSN 8414 covers various air and gas compressors and fans, while HSN 8415 pertains to air-conditioning machines comprising motor-driven fans and elements for changing temperature and humidity. The AAR noted that AHUs, used in central air conditioning systems with temperature control mechanisms, fall under HSN 8415, which includes parts of air conditioning machines. Consequently, the AAR ruled that AHUs should be classified under HSN 8415 90 00. Issue 2: Classification of Ventilation Units The applicant sought to classify Ventilation Units under HSN 8414 80 90. Ventilation Units, used for air circulation without temperature control, were argued to be distinct from AHUs. The applicant emphasized that Ventilation Units serve as prime air movers in ventilation systems and consist only of fans or fans with basic air filters. The AAR examined the classification of Ventilation Units, noting that HSN 8414 covers air or vacuum pumps, air or other gas compressors and fans. The AAR observed that Ventilation Units, which include pre-filter sections, fan sections, and controls but lack temperature control, can be supplied independently of air conditioning units. These units function as air circulators, involving fans that blow air out and create a vacuum filled by fresh air from outside after filtration. Based on the functional characteristics of Ventilation Units, the AAR concluded that they should be classified under HSN 8414 59 10, which deals with fans that are air circulators. Rulings: 1. The Air Handling Units supplied by the applicant are classified under HSN 8415 90 00. 2. The Ventilation Units supplied by the applicant are classified under HSN 8414 59 10.
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