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By: Dr. Sanjiv Agarwal
February 7, 2020
All Articles by: Dr. Sanjiv Agarwal       View Profile
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In Re: Bhutoria Refrigeration Pvt. Ltd.  2019 (7) TMI 1506 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA; , the appeal was filed against AAR, Maharashtra Order dated 03.10.2018 IN RE: M/S. BHUTORIA REFRIGERATION PVT. LTD. [ (2018 (12) TMI 143 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA].

In the instant case, applicant was engaged in the business to supply the Fan Coil Units along with its standard spare parts and accessories.

A Fan Coil Unit (FCU) is a simple device consisting of a heating and/or cooling heat exchanger or ‘coil’ and fan. It consists of three basic components fan motor, heat exchanger and PCB which is connected with the valves to control the flow of water as per the set temperature. FCU are used as the terminal units for centralised System for heat exchanging.

The applicant, sought advance ruling on whether the ‘fan coil unit’ is covered under HSN Code 8418 under Goods and Services Tax Act, 2017.

The Authority ruled that the Fan Coil Unit would not be covered under HSN Code 8418 but covered under HSN Code 8415.

Being aggrieved, applicant preferred an appeal before AAAR on, inter alia, following grounds:

  1. AAR erred in understanding Note 2(b) of section Notes of Section XVI which deals with classification of parts which are used with a particular kind of machine, are to be classified under the Tariff Heading of that machine with which they are used. Therefore, it is submitted that the parts if used with a particular kind of machine shall be classified with the machine of that kind only and not to be classified under the Tariff Heading in the machines they are used.
  2. Fan coil units, standalone, can be classified in appropriate sub-heading of CTH-8414 which specifically covers fans and cannot be classified in CTH 8415.
  3. AAR has erred in ignoring the judgment of Hon’ble Supreme Court in matter of Carrier Aircon Limited, specifically when both ‘chillers’ and ‘fan coil units’ are inter-dependent and supplementing each other in an-conditioning machine. Therefore, the judgment of Supreme Court, which has held that chiller is classifiable under CTH 8418 is squarely applicable to fan coil units also.
  4. AAR erred in understanding the technical description and working of the Fan Coil Unit wherein it has been clarified that Fan Coil Unit is used to freeze the water, supplied through pumps, to cool the area where the machine is installed. It is submitted that Fan Coil Unit is connected to chiller through valves & pumps. Chiller supplies water to FCU and FCU use this chilled water to cool the area where it is installed. Therefore, the basic function of a Fan Coil Unit is to freeze or cool the area
  5. AAR has erred in concluding that FCU fulfills all the requirements for classification under CTH 8415, whereas FCUs do not have any functionality or capability to act as Air Conditioning machines. The appellant referred to CBEC Circular dated 25.09.2002, in order to demonstrate that FCU do not contain any compressor and capillary line as comprised in air-conditioning machines. Therefore, the FCU cannot be termed as air-conditioning machines.

AAAR observed that the fan described under 8414 do not at all have any resemblance with a FCU. Therefore, there is no reason to believe that FCU will be covered by heading 8414.

The AAAR upheld the AAR ruling and declined to interfere, dismissing the appeal.


By: Dr. Sanjiv Agarwal - February 7, 2020



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