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TMI Blog2023 (6) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... 841590 are exempted from whole of BCD. The Bill of Entry was forwarded to Assessing Groups for verification by the RMS. In the course of online verification of self- assessment, a query was raised to the appellant calling for all the documents and the certificate of origins issued to them. They were also requested to justify their self-assessment as to how the goods can be classified under CTH 841590 as "parts of Air-conditioners". 2. In response, the appellant/importer furnished documents and explained that the goods are 'parts of air-conditioners' and put forward the following submissions: * The product they imported are City Multi VRF (Variable Refrigerant Flow) Air-conditioning System. * City Multi VRF Variable Refrigerant Flow (VRF) is a multi and direct expansion type air conditioning system in which one outdoor unit is connected with multiple indoor units. The amount of refrigerant can be regulated according to the load on the indoor unit by inverter driven compressor in the outdoor unit. Individual indoor units can stop and start their operation as needed. * Under City Multi VRF Air-conditioning System, there are various indoor units (i.e. Hiwall, Casette type, Ceil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 8110, Multi Split Air conditioner-Outdoor units of PUCY series (without reversible heat pump) under CTH 8415 8210 and the Control Panels under CTH 8415 8110. The exemption benefit claimed under FTA Notification No.46/2011 Sl.No.1103 (I) was thus denied. 4. Aggrieved by such order, the appellant filed appeal before the Commissioner (Appeals) who vide order impugned herein dismissed the appeal upholding the classification arrived at by the adjudicating authority. Hence the appellants are now before the Tribunal. 5. Ld. Counsel Shri Ankit Sachdeva along with Shri Neeladri Chakrabarti, Advocate appeared and argued the matter. Ld. Counsel for the appellant submitted that in the instant case, though the show cause notice dated 27.04.2015 is issued by D.R.I, appellant do not intend to contest the issue as to whether show cause notice issued by D.R.I is proper and valid. The appellant has filed an affidavit to this effect that they are not contesting the said issue and would not pursue this issue in any proceedings further. 6. The Ld. Counsel thus confined arguments on the merits of the case. It is submitted by the Ld. Counsel that the appellant had self-assessed the Bill of Entry by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units would be supplied. The outdoor and indoor units are kept in a warehouse and depending on the order requirements, the appellant would select outdoor and indoor units for installation at the customer's premises. Therefore, matching of all the Outdoor and Indoor units happen only after the order is placed by the customer and only at the time of installation at the customer's premises. 9. The features of the goods are explained as under : "i. CMVRF is a multi and direct expansion type air conditioning system in which one or more outdoor unit is connected with multiple indoor units. The amount of refrigerant can be regulated freely according to the load on the indoor unit by inverter driven compressor in the outdoor unit. Individual indoor units can stop and start their operation as needed. ii. Under CMVRF, various options are available in indoor units (i.e., Hi Wall, Cassette Type, Ceiling concealed type and floor standing) in order to suit various interior design needs of the Customer. iii. The outdoor unit of the CMVRF comprises of a fan, heat exchanger, inverter driven compressor and control box. The outdoor units imported have capacity ranging between 6.37 TR to 12.79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Counsel explained that the Air-conditioning system imported by the appellant is known as the "Variable Refrigerant Flow (VRF) system" which is an air-conditioning system configuration with one outdoor condensing unit and multiple indoor units. VRF systems are inherently different from multi-split air conditioning systems. The multi-split systems are covered under CTH 841581 or 841582, as the case may be. 14. Ductless products are fundamentally different from ducted systems in which the heat is transferred to or from the space directly by circulating the refrigerant to evaporators located near or within the conditioned space. In contrast, the conventional systems transfer heat from the space to the refrigerant by circulating air (inducted systems) or water (in chillers) throughout the building. VRF systems are larger capacity, more complex version of the ductless multi-split systems, with the additional capability of connecting ducted style fan coil units. They are inherently more sophisticated than multi-splits, with multiple compressors, many evaporators, and complex oil and refrigerant management and control systems. They do not provide ventilation and hence a separate venti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Ld. Counsel has referred to the HSN Explanatory Notes which reads as under : "Alternatively, they may be in the form of "split systems" which operate when connected together, i.e., a condenser unit for external installation plus an evaporator for internal installation. These "split systems" are ductless and utilize a separate evaporator for each area to be air conditioned (e.g. each room)." It is explained by the Ld. Counsel that from the above HSN Explanatory Notes, it can be seen that, split air-condoning systems, which are to be classified under CTH 84151010, are those systems which (a) have a condenser and an evaporator connected together (b) are ductless and (c) use one evaporator for each room to be air-conditioned. In other words, the system is 'one to one' (which means one condenser to one evaporator). 18. Adverting to the Customs Tariff Heading 8415, Ld. Counsel submitted that Customs Tariff of India is fully aligned with the HS. The subheads 841510 and 841520 are at the single dash and these cover two different class of air-conditioners. While CTH 841510 covers the one-to-one split systems, CTH 841520 covers air-conditioners of the type used in motor vehicles. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al capacity of Outdoor Units 513.22 Total capacity of Indoor Units 898.97 13% of 513.22 667.186 Diversity ratio of the Indoor units imported 175% 20. It is thus submitted that total capacity of the outdoor units as per the above table is 513.22 TR, whereas the total capacity of indoor units is 892.97 TR, which is way above the maximum diversity ratio of 130%. The actual total capacity of indoor unit is 175% of the total outdoor units capacity and way beyond the maximum diversity ratio of 130% permitted. These aspects have not been considered by the Commissioner (Appeals). 21. Ld. Counsel submitted that the issue stands covered by the decision of the Tribunal in their own case vide Final Order No.A/85491-85498/2022 dated 28.02.2022. It is submitted that the very same goods were imported by the appellants and the issue was considered by the Tribunal wherein it was held that the goods imported have to be considered as 'parts of air-conditioners' and merit classification under CTH 84159000. Ld. Counsel prayed that the appeal may be allowed. 22. Ld. A.R Ms. K. Komathi appeared and argued for the Department. 23. It is submitted by Ld. A.R that appellant have imported 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under heading 84151010 or 84159000, adjudicating authority has determined the classification under heading 84158110. For the period prior to 2013, appellants were importing the parts of CMVRF as complete unit, and claimed classification under the heading 84151010. Post 2013, appellant changed the practice, and started importing the goods as parts under different Bill of Entries. Thus post 2013, the impugned goods which were imported were never presented for assessment as complete CMVRF and according classified the impugned goods under heading 84159000 as parts. Adjudicating authority has without making any distinction between the manner of importation both pre and post 2013, classified these goods as complete unit under heading 84158110. We do not find ourselves in agreement with the decision of the adjudicating authority classifying these goods under heading 84158110 for the reasons sated by us in para 4.4 to 4.11. 4.14 Post 2013 appellants were importing these goods as parts and were filing the Bill of Entry declaring them as parts. Adjudicating authority has for the reasons stated by him in the impugned order, treated the imported goods as complete Unit by applying the "test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Explanatory Note was applicable, there would be no question of treating these notes to be in unassembled or disassembled condition since a complicated process had to be exercised and then before it could be used for the assembly of the CTVs. Of course this Explanatory Note was further amended by adding the words "no account is to be taken in that regard of the complexity of the assembly method. However, the components would not be subjected to any further working operation for completion into the finished stage". It is an admitted position that this amendment was not there and therefore, the complexity of the assembly method would have to be taken into consideration at least in case of the present goods since the concerned period is pre 1997 period. The Tribunal has correctly held that the HSN Explanatory Notes to Rule 2(a) had to be applied while considering the relevant Tariff Entry. It has also correctly held after considering the whole process that the process involved in the user of the components is the complex manufacturing process during which many components are subjected to working operation requiring sophisticated machinery and skilled operators. Further it has correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the imports were that of the components and not of fax machines. Shri Lakshmikumaran also invites our attention to the fact that Chapter 64 dealing with footwear does not have a note similar to Note 2 in Section XVI. Thus this position would render support to the proposition that Rule 2(a) would apply only when the imported articles presented unassembled or disassembled can be put together by means of simple fixing device or by riveting or welding. We have already pointed out in the earlier part of our judgment that the complicated process would be required for the user of those parts. 17. Lastly, we must take stock of the argument of Shri Lakshmikumaran that Section Interpretative Rule 2(a) would not be applicable at all in this case. For this he invited our attention to Rule 1 of Interpretative Rules as also to the decision in Simplex Mills v. Union of India [2005 (181) E.L.T. 345 (S.C.)] wherein this Court had held in para 11 as under : "11. The rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule 1 titles of sections and chapters in the Schedule are provid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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