Home Case Index All Cases Central Excise Central Excise + SC Central Excise - 2022 (10) TMI SC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (10) TMI 468 - SC - Central ExciseClassification of goods - heat pump - to be classified under heading 84.18 of the Schedule to the Central Excise Tariff Act, 1985 or not - under notification 155/86-CE dated 1.3.1986, heat pumps falling under Chapter 8418, enjoyed a limited exemption from the levy of excise duty - HELD THAT:- The definition of a product given in the HSN should be given due weightage in the classification of a product for the purpose of levying excise duty. This is because in the Statement of Objects and Reasons of the Bill leading to enactment of Central Excise Tariff Act, 1985, it was clearly stated that the pattern of tariff classification is broadly based on the system of classification derived from the International Convention on the Harmonised Commodity Description and Coding System (Harmonised System) with such contraction or modification thereto as are necessary, to fall within the scope of the levy of central excise duty - The heat pumps by utilizing energy, as per HSN becomes a source of more intense heat. However, since the final output of MVAC is cold/chilled water, the MVAC obviously does not fit into the given definition. The hot water, that is produced for generating chilled condition/ refrigeration, is only an incidental purpose of the MVAC and therefore classification of the appellant’s product as a heat pump on this basis, would in our view, be irrational. When the market/common parlance test is applied for the manufactured product, it is seen that the appellant in their website have identified Vapour Absorption Chillers and heat pumps separately. Significantly in the description of the product on the appellant’s website, Vapour Absorption Chillers do not mention about its heating capability. Likewise, heat pumps do not mention about the cooling function. This would suggest that the appellants do not themselves recognize the incidental hot water generating capacity of the Vapour Absorption Chillers, to treat it as a heat pump - what is important to keep in mind is that the additional purpose does not alter the primary character/functionality of the product which is to function as a vapour absorption chiller, used to produce chilled water for the purpose of refrigeration and air conditioning. This is how the product is recognized in the market. The incidental output from the machine cannot therefore justify classification of the product in the category of heat pump. Whether Chapter Note 7 to Chapter 84 can have a bearing in the present matter? - HELD THAT:- The present case pertains to heading 84.18 and the expression and phrases must therefore be literally construed to include two commercial classifications within the same heading. For example, a product under heading 84.18 can either be a refrigerator or a freezer or a refrigeration equipment or a heat pump not falling under Chapter 8415. In a situation like this, if we apply Chapter Note 7, the same can act as a tie-breaker mechanism. The resolution can be achieved by looking at the Principal Purpose Test, which if applied, can also resolve the intra-heading dispute. Such mode of interpretation in our understanding will aid in settling, the classification dispute by adhering to the HSN Code. The end use of MVAC is to produce Chilled Water. The use of heat as one of the sources in the air-conditioning system would not take away the primary or basic function of the MVAC, which is to cool and not heat water. The additional heating capability of the machine thus raises a peculiar dilemma, but then one can be guided by the market parlance test which shows that the machine is perceived and purchased only as a cooling device - it is declared that the product manufactured by the appellants merit classification under Sub-heading 8418.10 of the central excise Tariff Act, 1985, in the category of refrigerating equipment. The view of the CESTAT is thus affirmed. Appeal dismissed.
|