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TMI Blog2006 (7) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... y a common order as the point involved in all these appeals is the same. 2. Facts are taken from Civil Appeal No. 3914 of 2001. The point which calls for consideration is as to: "Whether the chillers manufactured by M/ s. Carrier Aircon Limited (respondent herein) are classifiable under Chapter Heading 84.18 of the Schedule to the Central Tariff Act (for short "the Act") as claimed by them or under Chapter Heading 84.15 as contended by the Revenue?" 3. M/s. Carrier Aircon Limited (respondent herein) is engaged in the manufacture of chillers besides other goods i.e. room air-conditioners, air handling units, gas compressors, radiators for central heating and parts of aforesaid goods. Respondent classified the chillers manufactured by it as refrigerating and freezing equipments under sub-heading No.8418.10 of the First Schedule to the Central Excise Tariff Act 1985 (for short the "Tariff Act"). The classification list was accepted by the Department 4. Commissioner of Central Excise, Central Excise Commissionarate, Delhi -III, issued a show cause notice dated 3.8.1999 to the respondent requiring them to state their case, vis-à-vis, the department's proposal to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. 5 to 10% of the total application. That the respondent had willfully suppressed the material facts of receipt of purchase orders of said chillers for air-conditioning equipments and use of chillers in combination with AHUs/FCUs for the purpose of air- conditioning system of star hotels, auditoriums, large office complexes, big hospitals and other large establishments from the department with a mala fide intent to evade appropriate payment of duty in as much as they never informed the department by way of any sort of correspondence that the purchase orders were placed by the customers for air-conditioning equipments comprising of chillers of required capacities, air handling units or fan coil units etc. The respondent was called upon to show cause to the Commissioner of Central Excise Delhi III within 30 days of the receipt of the notice, as to why: 1. The chillers should not be classified under sub-heading No.8415.00 instead of sub-heading No. 8418.00 of the First Schedule of the central Excise Tariff Act, 1985; 2. Central Excise Duty of Rs. 1,84,62,136/- (Rupees One Crores Eighty Four Lac Sixty Two Thousand One Hundred Thirty Six only) short paid on 249 number of chillers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illed water to cool the plant in paint shops in automobile manufacturing industry; to provide chilled water/air to cool the equipments in nuclear science centre; tool manufacturing companies; food industry; spot welding industry; textile manufacturing industry and in the chemical industry. That in all these applications and even in the central air-conditioning system, the function of chiller is understood to be to chill the liquid. As per Section 2(a) of Section XVI of the Tariff Act the chiller when cleared separately which specifically falls under Chapter Heading No. 84.18 cannot by any stretch of imagination be treated as part of an air-conditioner on the same analogy as fans used in the air- conditioner are classified at the time of clearance as an electric fan and not as a part of air-conditioner. That the chiller itself does not do any air-conditioning as it is designed only to refrigerate or produce chilled water/liquid. In support of its submission, the respondent relied upon certain judgments as well as the Board's circulars. 7. The Commissioner, Central Excise, in his order- in-original No. 9/2000 dated 24.3.2000 held that the chillers are classifiable under tariff h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air-conditioning plants. On the other hand, counsel appearing for the assessee contended that the primary function of the chiller is only to produce chilled water/liquid and the function of the chiller comes to an end once the chilled water/liquid is produced. 11. Rival tariff headings read as under: "84.15 Air-conditioning machines, comprising a motor driven fan and elements for changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated." "84.18 Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air-conditioning machines of heading No. 84.15." 12. The chilled water produced by the chiller is admittedly in turn being used in various industrial applications namely: (i) In polyester film processing, chilled water produced by chiller is used for cooling the rolls used in the manufacture of polyester films. (ii) The chilled water produced by chiller is used in the processing of colour picture tubes. (iii) For the painting of cars, a process is used whereby the entire car body is charged negative and dipped in paint charged positive. During the process a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is intended to cover only those machines which comprise of elements for changing temperature and humidity and chillers would fall outside the purview of the said entry. The function of the chiller is only to chill water or bring it to a very low temperature, and it is the air handling unit having an independent and distinct function which produces the effect of air-conditioning, controlling the temperature and the humidity. The chiller itself does not do any air- conditioning as it is designed only to refrigerate or produce chilled water/ liquid. 17. Revenue is classifying the impugned chillers as parts of the air-conditioning system as the same is used in central air-conditioning plant of star hotels, airport, hospital, large office complexes and large establishments. The use of the chillers in the air-conditioning system would not take away the primary or basic function of the chiller which is to produce chilled water by using a refrigerating circuit. Heading 84.18 covers refrigerators, freezers and other refrigerating or freezing equipment. Accordingly, the chillers in question shall fall under specific heading 84.18 of the Tariff Act. This view is supported by the explan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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