TMI Blog2009 (1) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... Sridharan with R. Nambirajan, Advocates, for the Respondent. [Order per : A.K. Srivastava, Member (T)]. - These three appeals by the Revenue are directed against three separate Orders-in-Appeal passed by the Commissioner (Appeals), Central Excise and Customs, Pune setting aside the Orders-in-Original of the Asstt. Commissioner and the Dy. Commissioner of Central Excise, Pune and allowing the appeals of the assessee-respondent. 2. Common issue involved in appeal Nos. E/1482/2000 and E/1731/2000 is whether Modified Vapour Absorption Chillers (hereinafter referred to as MVACs) are parts of refrigeration/air-conditioning machinery falling under sub-heading 8418.90 as contended by the revenue or Vapour Absorption Heat Pumps falling under Heading 8418/8418.10 as contended by the assessee. In Appeal No. E/819/2000, the issue involved is whether the value of Lithium bromide is includible in the assessable value of MVACs and whether benefit of abatement under Section 4(4)(d)(ii) of the Central Excise Act, 1944 is available to it. 3. Facts of the case in brief are that the respondent, M/s. Thermax Ltd. is engaged in the manufacture of various machinery including Vapour Absorptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dtd. 10-3-98 was served on the assessee demanding duty of Rs. 37,05,96,407/- on the MVACs along with the value of lower end accessories and the value of lithium bromide for the period June, 1991 to September, 1997 in terms of Rule 9B of the erstwhile Central Excise Rules, 1944. Prior to issue of this show cause notice dtd. 10-3-98, 14 other periodical show cause notices were also issued to the assessee covering the period from June, 1991 onwards. 3.6 After obtaining replies to the notices and hearing the assessee, the Asstt. Commissioner of Central Excise and Customs, Pune-II Division. vide Order-in-Original No. PNH/CEX-87/98-99 dtd. 21-8-98 decided the classification of modified vapour absorption chiller/vapour absorption heat pump as parts of refrigeration/air-conditioning system under sub-heading 8418.90 of the Central Excise Tariff at the appropriate rate of duty. Accordingly, he confirmed the differential duty of Rs. 11,99,36,826/- arisen out of classification dispute. He, however, dropped the rest of the demand relating to inclusion of value of lower and accessories and lithium bromide in the assessable value of MVACs. 3.7 Against the above order of the Asstt. Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue and Shri V. Sridharan, ld. Counsel for the assessee at length. 5. Shri Mondal, ld. Consultant for the revenue took us through the findings of the Asstt. Commissioner on the question of classification which are to the following effect: (i) As per HSN Explanatory Notes, heat pump is a device which draws heat from a suitable heat source (principally underground or surface water, the soil or the air) and converts it with the assistance of a supplementary energy source (e.g., gas or electricity) into a source of more intense heat. HSN Explanatory Note further emphasizes that heat pumps are used essentially to heat buildings or provide domestic hot water. (ii) In its technical and marketing literature, the assessee has projected the product as refrigeration/air-conditioning machinery used for industrial cooling or process cooling. (iii) In their statements, the officials of the assessee have also admitted that the disputed product is used as a part of refrigeration/air-conditioning machinery which is used for industrial cooling purpose. (iv) No customer has ever specifically ordered for this product for using in heating mode. (v) The modified vapour absorption chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. He also relied upon the decisions of the Tribunal in the case of CC CE, Mumbai v. Voltas Ltd. - 2005 (180) E.L.T. 57 (T) and in the case of CCE, Mumbai v. Blue Star Ltd. - 2006 (198) E.L.T. 454 holding that heat pumps are correctly classifiable under Chapter Heading 84.18. 6.1 Regarding inclusion of value of lithium bromide in the assessable value of MVAC, it was contended that lithium bromide is neither raw material nor component part of MVAC. It is a liquid and is used in the MVAC as an absorbent. The body of the MVAC is manufactured out of raw materials like steel plates and copper tubes. Lithium bromide is never despatched along with MVAC. It is a bought out item and is being cleared separately from the duty paid godown. Hence its value cannot be included in the assessable value of MVAC. 6.2 Ld. Counsel also relied upon the judgment of the Hon'ble Apex Court in the case of CCE v. ACER India Ltd. - 2004 (172) E.L.T. 289 (S.C.) and the Tribunal's decision in the case of Bharat Heavy Electricals Ltd. v CCE - 2000 (119) E.L.T. 350 (T) and submitted that vapour absorption heat pump and lithium bromide are completely distinct and separate items and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re only of cosmetic nature. These modified vapour absorption chillers are used as chillers and they are functionally identical to chillers only. 12. Shri Mondal also submitted that the customers have used the MVACs in the cooling mode as a component in central air-conditioning machinery or cooling of process fluid out of chilled water obtained out of the MVACS. In this connection, he took us through the statements of various officials of the assessee-company during the investigation. Shri Satish Jagannath Kalokhe, Divisional Manager, Manufacturing in his statement dated 21-11-96, Shri Mukund Sudhakar Ranade, Divisional Manager, Engineering and Product Development in his statement dated 26-10-96 and Shri S.S. Shastri, Divisional Manager, Absorption Cooling Division in his statement dated 18-12-96 have stated that no customer had ever specifically ordered for modified vapour absorption chiller to be used in the heating mode only. They have also stated that the customers have used the MVACs to produce chilled water at controlled temperature and this chilled water is used to cool the air in the air handling unit of the Central Air-conditioning machinery or to cool the process fluid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pump is a device which draws heat from a suitable heat source (principally underground or surface water, the soil or the air) and converts it with the assistance of a supplementary energy source (e.g. gas or electricity) into a source of more intense heat. A heat-transfer fluid is generally used to transfer the heat from the source to the heat pump and from the heat pump to the medium to be treated". ------------- ------------- Regarding its use, at page 1270 the HSN Explanatory Notes state as follows: ------------- "Heat pumps are used essentially to heat buildings or provide domestic hot water. Non-reversible heat pumps are generally used for these purposes" 15. From the above HSN Explanatory Notes, it is seen that a heat pump is a device which is used essentially for the purpose of heating buildings or pro-viding domestic hot water. 16. In the Book entitled "Refrigeration and Air-conditioning" (Second Edition) by Shri C.P. Arora, while dealing with Heat Engine, Heat Pump and Refrigerating Machine at page 72, the author, inter alia, says that as for the heat pump, there is no difference in the cycle of operation between a refrigerating machine and a heat pump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufactured and cleared by the assessee cannot be called as heat pumps in the facts and circumstances of this case. 20. Ld. Counsel for the assessee, however, submitted that the MVACs have the in-built capacity or capability of producing both chilled water and hot water simultaneously. That may be, but then the factor to be looked into is how these MVACs were used. The evidences brought on record clearly show that these were used by the customers to produce chilled water at controlled temperature and this chilled water was used to cool the air in the air handling unit of the Central Air-conditioning machinery or to cool the process fluid by the chilled water. From this, it is quite clear that the main purpose of use of the MVACs was to produce chilled water and not hot water. In this situation, classification of MVACs is to be decided by reference to Chapter Note 7 of Chapter 84 which reads as follows: "7. A machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose". 21. We have already seen from the Book entitled "Refrigeration and Airconditioning" (Second Edition) by Shri C.P. Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable under Heading 8418 or 8415. The Deptt. classified them under Heading 84.15 for the reason that they are extensively used in air-conditioning machinery. However, the Deptt. failed to establish that they are so used. Another significant distinguishing factor in Blue Star Limited's case as seen from the Commissioner's order reproduced in the Tribunal's order was that the heat pumps in question were manufactured for general purposes under licences for Heavy Industries Ltd., whereas in the present case, the MVACs were manufactured by the assessee under specific designs and specifications of the customers for use in the refrigeration/air-conditioning machinery. Therefore, the facts of the two cases are quite different. Hence Blue Star Limited's case cannot advance the case of the assessee. 25. We have already held herein before in para 19 that the MVACs manufactured and cleared by the assessee cannot be called as heat pumps in the facts and circumstances of this case. Hence benefit of the notifications applicable to heat pumps during the relevant period will not be available to the assessee. 26. We have now to see whether these MVACs can be treated as parts or components of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Commissioner of Central Excise and set aside the Order-in- Appeal No. PII/NK-105/99 dtd. 30-9-99 and Order-in-Appeal No. PI/NK-94/2000 dtd. 14-2-2000. The jurisdictional Asstt. Commissioner/Dy. Commissioner of Central Excise shall re-calculate the duty demands after affording adequate opportunity to the assessee of being heard. 29. Appeal No. E/1482/2000 and Appeal No. E/1731/2000 are thus allowed by way of remand in the above terms. Appeal No. E/819/2000 30. We find that two issues are involved in this appeal. The first issue is whether the value of lithium bromide is includible in the assessable value of Modified Vapour Absorption Chiller (MVAC) and the second issue is whether benefit under Section 4(4)(d)(ii) of the Central Excise Act, 1944 can be extended for computing the assessable value of MVACs. 31. We take up the 1st issue first for consideration i.e. whether the value of lithium bromide is includible in the assessable value of MVACs. The case of the Revenue is that lithium bromide is sold along with MVAC. It is absolutely essential for working of MVAC inasmuch as it must contain lithium bromide as absorbent to make it function. Hence its value shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal is that the price quoted by the assessee is not cum-duty price. The quoted price is the basic price of the goods plus Excise duly @ 18% ad valorem payable thereon. Ld. Consultant for the revenue has submitted that this factual aspect has not been verified by the lower authorities before granting benefit under Section 4(4)(d)(ii) resulting in errors. He has relied upon the decision of Hon'ble Apex Court in the case of Amrit Agro Industries Ltd. v. CCE reported in 2007 (210) E.L.T. 183 (S.C.) wherein it has been held that unless it is shown by the assessee that the price of the goods includes the Excise duty wherein it has been held that unless it is shown by the assessee that the price of the goods includes the Excise duty payable by him, no question of exclusion of duty element from the price for determination of the value under Section 4(4)(d)(ii) arises. 33.2 As per facts of the case, we find that during the relevant period June, 1991 to September, 1997, the assessee was paying concessional rate of duty as applicable to heat pumps under various notifications, such as, Notification No. 155/86-C.E., Notification No. 54/93-C.E., etc. In the case of Srichakra Tyres L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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