1. In this matter the allegation is that M/s. Air Mechanical Engineers of Baroda, Appellants in this case, had recovered higher price for "4 water coolers without condensing units" cleared by them. The department's case is that although both the water coolers cleared by M/s. Air Mechanical Engineers were without compressors and condensers, they contained cooling coils, water tanks, trays etc., and that the duty was chargeable on the parts such as cooling coil and cabinets under Tariff item No. 29-A (iii).
2. In the Order in Original which has been upheld by the Appellate Collector of Central Excise, Bombay, the Superintendent of Central Excise has imposed a penalty of Rs. 100 on the appellants under Rules 9 and 173-Q of Central Excise Rules, 1944, and demanded duty amounting to Rs. 13.840/- on 4 cooling coils and 4 cabinets alleged to have been removed without payment of duty.
3. Appearing on behalf of the Appellants, Shri Willingdon Christian, Advocate, has stated that as per Tariff Item 29-A, only refrigerating and air-conditioning appliances and machinery all sorts and parts of such appliances and machinery are excisable. It is further claimed that as per the Tariff items, the parts of the units which are not ordinarily sold or offered for sale but are manufactured as per specification of particular customers cannot be brought under the purview of Tariff Item 29-A. It is urged that neither the cabinets nor the water coils in this case are covered by items described under Notification No. 80/62-Central Excise, dated 24th April, 1962. Also, it is pointed out that the duty cannot be demanded under Rule 9 of Central Excise Rules as this is not a case of clandestine removal. Finally, it is stated that the impugned order is not a speaking order and the Appellate Collector has given no finding on the various submissions which have been made by the Appellants. Shri Willingdon Christian has cited the decision in Frick India's case (1979 E.L.T. J-124) in his favour.
4. On behalf of the Respondents, Shri Lakshmikumaran, has reiterated the views of the Collector. It is stated that the question for consideration is whether the cooling coils and cabinets should be treated as parts of refrigeration equipment under Tariff Item 29-A (iii) of the Central Excise Tariff. There is no justification for exclusion of the value of cabinet or cooling coils from the assessable value of the water coolers cleared as there is no doubt that these are parts of the system. The contention of the Appellants that the cooling coils do not operate on compressed gas is not relevant; what is relevant is that they their function as cooling coils in the system.
5. Shri Lakshmikumaran, had stated that there were certain High Court and CEG AT decisions in favour of the Department's point of view. He had assured that citations of these cases will be furnished separately.
No such citations have, however, been furnished by him. We have, therefore, to proceed on the assumption that there are no decisions in favour of the Department's point of view.
6. We have carefully considered the submissions made on both sides and the evidence on record. Tariff item 29-A reads as follows :- 29-A. Refrigerating and Air-conditioning Appliances and Machinery, all sorts and parts thereof: (1) Refrigerators and other refrigerating appliances which are ordinarily sold or offered for sale as ready assembled units, such as ice makers, bottle coolers, display cabinets and water coolers.
(2) Air conditioners and other air-conditioning appliances, which are ordinarily sold or offered for sale as ready assembled units, including package type of air-conditioners and evaporative type of coolers.
(3) Parts of refrigerating and air-conditioning appliances and machinery, all sorts.
As per Exemption Notification issued separately, all parts of refrigerating and air-conditioning appliances and machinery falling under this item, other than the parts specified in these notifications are exempt from duty. These specified parts include cooling coils or evaporators and cabinets. The question for consideration before us is whether the cooling coils or cabinets cleared by the Appellants are classifiable under item 29-A of Central Excise Tariff.
7. On a mere reading of the relevant Tariff Item one fact is quite clear that it deals with the refrigerating and air-conditioning appliances and machinery and parts thereof. So far as parts are concerned, they are required to be of such refrigerating and air-conditioning appliances. What we are required to consider, therefore, is whether the parts in question here, viz. coils and cabinets can be considered as parts of refrigerating and air-conditioning appliance and machinery.
8. On behalf of the Appellant, it has been shown that what they are manufacturing is an appliance which consists of water storage tank, cover of the tank, two cocks for getting water, one tray, one float valve, one filter and one drainage cutlet. This unit by itself does not cool water. It has neither a compressor nor a condenser. It cannot, therefore, be described as an air-conditioning or refrigerating appliance. Its function of cooling water is performed only by means of its connection with the chilling plant of the customer from which chilled water flows into the coils of the machine. It has been stated in the order of the Appellate Collector that as long as coils are used for cooling, they would be considered as cooling coils classifiable under item 29-A, (iii). It seems to us that this would not be a correct interpretation of the relevant Central Excise Tariff entry. The Appellants have clearly differentiated the coils used in their equipments from cooling coils used in refrigerating equipment. In this connection, we have seen the decision of the Government of India in Frick India case 1979 E.L.T. (J. 124) which has been cited by the appellants in their favour. The relevant extract from this decision is reproduced below :- "2. During the course of personal hearing, counsel referred to order No. 188/77 dated 31-10-1977 passed by the Government in revision holding that the coils which are chargeable to duty in terms of Notification No. 80/62-C.E. dated 24-4-1962 are those which are used in the closed circuit where the refrigerant gas is compressed and which has inbuilt system for this purpose. It has been submitted that the water coils cleared by the petitioners were also such that these did not have any inbuilt system for passing refrigerant gas or for its compression and as such these would not be dutiable as cooling coils. It has also been stated that these water coils were merely pipes used for passing water.
3. In view of Government's order referred to by counsel during personal hearing, Government observe that water coils are essentially different from cooling coils and the latter alone were dutiable under Notification No. 80/62 because in view of the inbuilt cooling arrangement these could be termed as cooling coils. In the circumstances, if the goods cleared by the petitioners during the relevant period were not cooling coils but only water coils, no duty would be payable for the same..." 9. We fully concur with the view taken in the foregoing decision of the Government of India. Accordingly, we hold that the coils under dispute are not excisable under item 29-A (in) Central Excise Tariff.
10. For the same reason, we have to hold that the cabinets of the equipment in question will not attract duty under Tariff Item 29-A of Central Excise Tariff.
11. In view of our foregoing finding, we set aside the impugned order, including demand for duty and the penalty and allow the Appeal.