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TMI Blog2015 (7) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... l no.8 and the automotive gas compressor with or without magnetic clutch will be liable to duty separately. We may hasten to clarify that if there is a combined sale, which serial item it will fall, being not necessary in this case, we are not inclined to dwell upon the same. We have only clarified the two-Judge Bench decision in Sanden Vikas (India) Ltd. [2003 (3) TMI 97 - SUPREME COURT OF INDIA] to the above effect. Coming to the case at hand, it is the case of the appellant that the respondent-assessee has sold the kit and compressor separately and that position having been accepted by the tribunal, we do not find any error in the order passed by the authorities and the Tribunal. - Decided against the revenue. - Civil Appeal No. 9730 of 2003 - - - Dated:- 1-7-2015 - Dipak Misra, R. K. Agrawal And Prafulla C. Pant, JJ. For the Petitioner : Ms Sunita Rani Singh, Adv. Mr. B. Krishna Prasad, AOR For the Respondent : Mr M P Devanath, AOR JUDGMENT Dipak Misra,J. The present appeal calls in question the legal substantiality of the judgment and order dated 23.04.2003 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (for short, & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (for short, 'the Act') for the purpose of availing the benefit of exemption as given under Notification No. 166/86-CE dated March 1, 1986 (as amended from time to time). The appellant therein contended that it was only manufacturing parts of the air-conditioning kit and, therefore, the kit could not be treated as an air-conditioner. The Assistant Collector, disagreed with the stance of the assessee and treated the same as air-conditioning system falling under Item No. 3 of the Heading 8415 of the Notification. On March 20, 1990, a new Entry, Item No.8, was added to the table of the Notification and thereafter the assessee classified the air-conditioning kits under the said Entry for the purpose of levy of excise duty. On October 1, 1990, the Assistant Collector, Central Excise, Division-I, Faridabad issued a notice to the assessee stating that under the said Entry i.e. serial no. 8, the sub-heading relating to compressor had not been included in the second column of the table and as the car air-conditioning kits include compressor they fall under Item No.3 (Heading No. 8415.00) of the Notification and accordingly the assessee was asked to show cause why the excise duty amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioning kits. 14. As the air-conditioning kit is meant for providing air-conditioning in car and as the description of the goods first mentioned against column (3) which notes air-conditioners, we are inclined to take the view that the car air-conditioning kit fell within the meaning of the air-conditioners against Item No. 3 before March 20, 1990. This position continued till Item No. 5 was amended and Item No. 8 was inserted in the said Notification where specific entry with regard to parts and accessories of car air-conditioner and car air-conditioning kit was provided. Thereafter, the Court opined that a specific Entry prevails over the general Entry and, therefore, w.e.f. March 20, 1990 till July 25, 1991, air-conditioning kits which comprises of various parts are classifiable under Item No. 8 of the said Notification. The Division Bench reproduced the Explanation (2) that was added on July 25, 1991, which reads as under:- Explanation (2) - For the purposes of this notification, the term 'car air-conditioner kit' or 'car air-conditioning kit' shall exclude the kit or assembly of parts which contains automotive gas compressor with or without magnetic c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to Rule 2(a) of Rules of Interpretation and Section note 4 to Section XVI to highlight that while interpreting the section notes, the respondent would be disentitled to the benefit of the Notification since in the manner in which the goods came to be cleared, the compressor remained part of the air-conditioning kit. Elaborating the same, it is contended by her that the car air-conditioning kit cleared by the respondent was also having a corresponding clearance of gas compressor and the same constitute an air-conditioning unit and would be chargeable to duty as per serial no.3 of the Notification as held by this Court in paragraph 14 of the earlier judgment. Learned counsel has referred to certain facts how the respondent was able to supply the order during the period August, 1991 to February, 1993 to avail the benefit under serial no.8 of the said Notification. She has placed reliance on Collector of Customs v. Maestro Motors (2005) 9 SCC 412, for in the said decision, as per the learned counsel, it has been held that when in a Notification exemption is with reference to an Item in the First Schedule to the Customs Tariff Act, then the interpretative rules would equally appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditioning kit or assembly of parts stands excluded from the term car air-conditioner kit or car air-conditioning kit and hence, the said Explanation has no bearing if a car air-conditioning kit is cleared without the automotive gas compressor. Learned counsel has submitted that as the respondent had cleared the automotive gas compressor separately on payment of duty in serial no.1 and the car air-conditioning kit without the automotive gas compressor was cleared separately in serial no.8, it is not liable to pay any further excise duty. Elaborating further, it is urged by Mr. Lakshmi Kumaran that as the items were cleared independently they attract duty as given in serial no.1 of Notification. It is his stand that the respondent during the relevant period was not clearing the car air-conditioning kit with the automotive gas compressor and any decision on this plea of the appellant, as far as the respondent is concerned, is only academic. 6. Learned counsel would further submit that the car air-conditioning kit consisting of the automotive gas compressor will be an air-conditioning machinery falling under Chapter 8415 of the Central Excise Tariff Act but not an 'air co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has commended us to the decision in CCE, Jaipur v. Mewar Bartan Nirman Udyog (2010) 13 SCC 753. It is also urged by him that the decision in Maestro Motors (supra) is not applicable to the facts and circumstances of the present case since in that case the words used in the Excise Tariff and the Notification were identical, whereas in the present matter, the Explanation 2 has re-defined the term car air-conditioner kit or car air-conditioning kit and these terms are not part of the Excise Tariff, therefore, the principles of the Rules of Interpretation of the Tariff are inapplicable for the purpose of interpretation of the present Notification No. 166/86-CE. 8. On the basis of the aforesaid submissions, learned counsel for the respondent would contend that there is no requirement for reconsideration of the judgment passed in Sanden Vikas (India) Ltd. (supra). 9. At the outset, it is imperative to appositely scrutinise the Notification No. 166/86-CE dated 1.3.1986 (as amended from time to time). In the case at hand, we are concerned with the amendment made in the said Notification vide Notification Nos. 75/90-CE dated 20.03.1990 and 68/91-CE dated 25.07.1991 10. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factual matrix would unveil, the respondent-assessee had cleared the car air-conditioning kits without gas compressors under serial no.8 and automotive gas compressors under serial no. 1. To put in other words, the respondent has paid ad valorem excise duty at 65% on the car air-conditioning unit without gas compressors and 40% ad valorem duty on the gas compressors. The stand of the revenue is that in terms of Explanation 2 read with Rule 2(a) and Section Note 4 to Section XVI, the goods manufactured would be covered by serial no.3 of the aforesaid Notification and they were chargeable under the same. Similar issue had arisen and this Court has dealt with it in paragraph 18. Before we proceed to scrutinise the correctness of the said authority, we have to clear the maze, whether interpretation as per Rule 2(a) would be applicable to the Notification. Rule 2(a) of Rules for the Interpretation of Schedule reads as follows:- 2. (a) Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply and assessee would be entitled to claim nil rate of duty under the said notification. At that juncture, the Court opined that:- 5. We may also point out at this stage that it is well settled position in law that exemption Notification has to be read strictly. A notification of exemption has to be interpreted in terms of its language. Where the language is plain and clear, effect must be given to it. While interpreting the exemption notification, one cannot go by rules of interpretation applicable to cases of classification under the Tariff. Tariff items in certain cases are required to be interpreted in cases of classification disputes in terms of HSN, which is the basis of the Tariff. In this case, we are not concerned with interpretation of Tariff. In fact, as stated above, the product in question falls under Chapter Heading 74.09. It is the dichotomy which is introduced by the exemption Notification which needs to be interpreted. Items made from copper attract duty at the rate of ₹ 3500 PMT whereas circles made from brass attract nil rate of duty. As stated above, in this case, the Department has not disputed the fact that the circles were manufactured by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-conditioners. Needless to say that the air-conditioner is a distinct and separate commodity sold and purchased and is distinguishable from the gas compressors or kits. Serial no.5 deals with parts and accessories of refrigerator and air conditioning appliances and machinery of all sorts. Thus, serial no.5 would cover air-conditioner kits, but would not include compressors, for they are specifically covered under serial no.1. It is apt to note here that parts and accessories of a car air-conditioner including air-conditioning kit, are expressly excluded from serial no.5. The reason for exclusion is that car air-conditioners and car air-conditioning kits have been included in serial no.8. Car air-conditioner or car air-conditioning kits cannot per se perform essential functions of an air-conditioner until and unless they are fixed in a car. A car air-conditioning is obtained by fitting part by part, compressor is fitted above engine, condenser is fitted in front of the radiator, cooling coil is fitted inside the car, fan is fitted in front of cooling coils and then all theses parts are connected by copper pipes to complete the cycle. If this exercise is not carried out, they would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te or finished air-conditioner as a dutiable entity under serial no.3, but kit of the same air-conditioner is not treated at par and similar to a complete or finished air-conditioner dutiable under serial no.3. The air-conditioners' parts and the accessories including air-conditioner kits are dutiable under serial no.5, if it relates to a window, split or packaged air-conditioner. The compressor, however, is liable to duty as per the rates specified in serial no.1. Car air-conditioning kits are dutiable under serial no. 8 and after insertion of Explanation 2, the car air-conditioning kits without the compressor would be dutiable in serial no.8 and the compressor itself would be dutiable separately under serial no.1. This is the intention of the notification. Regard being had to the notification, which we have already spelt out in the context of notification, it can safely be stated that the accessories and parts including kits, compressors and the finished or complete air-conditioners having treated separately under different serial numbers and the notification intended to maintain the said distinction between a completed and a finished produce and the kits and compressors whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner kit or car air-conditioning kit itself from item no.8 of the Notification. What follows is that car air-conditioning kit minus automotive gas compressor with or without magnetic clutch will remain in the description of goods against item no.8 of the Notification and the excluded part of the kit, namely, automotive gas compressor with or without magnetic clutch will cease to be a part of item no.8 and will be liable to duty separately. As we understand from the said conclusion, a car air-conditioning kit, if it contains an automotive gas compressor with or without magnetic clutch, the kit part will meet the description of goods against item no.8 of the Notification and the automotive gas compressor with or without magnetic clutch will be liable to duty separately and it will go away from description of Item no.8. To elaborate, if a car air-conditioning kit has both, there has to be two sets of duty; one for the kit and the other for the automotive gas compressor with or without magnetic clutch. Learned counsel for the Revenue would submit that such an interpretation is contrary to the Explanation (2) as it clearly lays the postulate that the car air-conditioner kit or car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view, the ratio laid down in the said decision cannot be found to be erroneous but as a matter of clarification, we say that if a kit and compressor are sold in a singular invoice or in one pricing, it will go out of item no.8 and duty will be paid separately, but if there are two invoices for separate pricing, the air-conditioning kit would come under serial no.8 and the automotive gas compressor with or without magnetic clutch will be liable to duty separately. We may hasten to clarify that if there is a combined sale, which serial item it will fall, being not necessary in this case, we are not inclined to dwell upon the same. We have only clarified the two-Judge Bench decision in Sanden Vikas (India) Ltd. (supra) to the above effect. 25. Coming to the case at hand, it is the case of the appellant that the respondent-assessee has sold the kit and compressor separately and that position having been accepted by the tribunal, we do not find any error in the order passed by the authorities and the Tribunal. 26. Resultantly, the civil appeal stands disposed of with the clarification of the decision in Sanden Vikas (India) Ltd. (supra) as per paragraph 24. There shall be no o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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