ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to the classification of the item called Chillpac which has been described as seen from the order of the ld. lower authority in the catalogue as under :
Chillpac is “The Ultimate Peace and Unique Compact Water Chilling Plant” and that “The factory tested CHILLPAC is offered with novel features on par with home appliances in terms of design, smooth & noiseless function yet guaranteeing efficient performance and continuous 24 hours operation. CHILLPAC can supply chilled water upto 5 degree C.”
2. The appellants claim the assessment of the same under tariff Heading 84.19 with benefit of Notification 175/86. The ld. lower authority, however has held the goods to be assessable under tariff Heading 84.18 and which heading stands precluded from the purview of Notification 175/86. The ld. lower authority’s findings in this regard are as under :
“32.0. On the other hand, noticee broadly questions the excisability of Chillpac and package A.C. and the correct classification of Chillpac both for the purposes of classification under CET and also for the purposes of eligibility of exemption under Notification 175/86, dated 1-3-1986 as amended.
34.0. As regards the plea that what is assembled at their factory is only a bare unit consisting of compressor, chiller, and condensor fixed in a frame and that it is complete only with the rest of the components to be attached at site, I observe that the goods cleared, even as claimed and mentioned above, have the essential character of a refrigerating equipment. Even HSN Explanatory Note specifically states the essential elements of a compressor type refrigerator are compressor, condensor and evaporator. Therefore, by application of Rule 2(a) of Rules for Interpretation, the same can be considered as refrigerating equipment.
35.1. Further, I find that even according to the initial statement of Shri S. Thiagarajan, Managing Director of the noticee company, the Chillpacs are occasionally tested by providing the temporary components like condensor, chiller, water piping, cooling coil, etc. Also according to the statement, dated 17-12-1992 of Shri C. Kamaraj, the factory in-charge of the noticee company, only assembled goods are sent under the delivery challans, and Chillpac is tested at factory itself before despatch with the help of tower, erected in their own factory. He had also specifically deposed that clearances effected under factory gate-pass No. 342, dated 7-12-1992 and 298, dated 25-9-1992 were chilling plants assembled in full condition and cooling towers. This statement of Sri Kamaraj has not been retracted upon or assailed with evidence till date.
35.2. Also the SCN indicates that Polytoug Tubes Ltd., and Peacock Polymers P. Ltd., who had bought the chilling plant from the noticee company, had deposed that they bought ‘Chillpac’ in assembled condition after fabrication and testing at the manufacturing premises. The noticee has not chosen to specifically dispute this with evidence. Finally a reference to their product literature indicates that Chillpac is “The Ultimate Peace” and “Unique, Compact Water Chilling Plant” and that “The factory tested Chillpac is offered…. The SCN also further indicates that during the course of search, the officers had noticed a chilling plant in a fully assembled condition kept under testing process, which they initially detained on 17-12-1992 and later seized.”
3. The ld. Advocate for the appellants Shri Datar has contended that the petitioner was under the bona fide belief that Air-conditioning and Refrigerating equipment would fall under Heading 84.18 and eligible for exemption upto clearance of Rs. 5.00 lakhs under Notification No. 75/87. The petitioner also was under the bona fide belief that Chillpac the processing cooling equipment would also fall under Heading 84.19 and eligible for exemption under Notification 175/86. In this connection he pointed out that the Collector of Central Excise, issued show cause notice to the effect that Chilllpac is not eligible for exemption under Notification 175/86 and it is classifiable under Heading 84.18 and that the petitioner manufactured the excisable goods and cleared the same without payment of duty after crossing the exemption limit of Rs. 5.00 lakhs as provided under Notification 75/87, dated 1-3-1987.
4. He referred to the HSN notes under Headings 84.18 and 84.19. The scope of the item falling under 84.18 he pointed out is as under in the HSN.
“The refrigerators and refrigerating equipment of this heading are in the main machines or assemblies of apparatus for the production, in a continuous cycle of operations, of low temperatures (in the region of 0° C or less) at the active cooling element, by the absorption of the latent heat of evaporation of liquefied gases (e.g., ammonia, halogenated hydrocarbons), of volatile liquids or, in the case of certain marine types of water.”
5. He pleaded that the temperature of water chilled achieved in the appellants unit is only upto 5 °C and nowhere near zero. He has pleaded the chilled water is used for bringing about the change in temperature of the materials when the Chillpac unit is connected to the plant which the material is processed. He has therefore pleaded the item for reason of functions performed falls more appropriately under the Heading 84.19 which covers the equipments for treatment of materials.
6. The ld. departmental representative adopted the reasoning of the ld. lower authority. He pleaded that scope of the tariff Heading 84.19 is rather limited and only when the equipment brings about change in temperature when the materials is processed through it, it will come within the purview of the Chapter 84.18. He pleaded here the equipment functions on refrigeration principal and produce low temperature to cool the water which in turn brings about the change in the temperature of the materials processed in the main plant.
7. In rejoinder the ld. Advocate pleaded that water can be taken to be treated in the equipment.
8. We have considered the pleas made by both sides. The equipment in question operates on the principle of compressor type refrigerators the essential elements of which are described in the HSN as under :
“(A) COMPRESSION TYPE REFRIGERATORS
Their essential elements are :
(1) The compressor which receives expanded gas from the evaporator and delivers it under pressure (2) The condenser or liquefier where the gas is cooled and liquefied, and (3) The evaporator, the active cooling element, consisting of a tubular system in which the condensed refrigerant, released through an expansion valve, evaporates rapidly with the absorption of heat from the surrounding air or, in the case of large cooling installations, from brine or a solution of calcium chloride kept in circulation around the evaporator coils.
In the marine type there is no compressor and condenser in the refrigerant (water or brine) circuit, but the evaporation is induced by a vacuum produced by an ejector pump working with a steam condenser. The latter condenses and disposes of the vapours produced, which are not returned to the system.”
9. The items as per HSN covered under Heading 84.18 are such as produce temperature in the region of near zero. We had enquired from the ld. Advocate regarding the capability of the equipment to produce low temperature and he clarified after consulting his client that with the help- of a cut out the temperature generated was kept at 5 °C. It is seen that the unit has the capability to produce lower temperature but by the help of a thermostat the temperature is kept at the desired level. The equipment in our view has the characteristics and is technically has the configuration of the equipments answering to the description Refrigerators and others.
10. The Chapter Heading 84.19 in our view covers a limited range of equipment in which the materials treated to involving change of temperature such as Cooking, Roasting, Steaming, Drying, Evaporating, Vaporising, Condensing. The coverage of machinery under this heading as seen from the different type of equipment mentioned under this shows that Chillpac is not one of the item covered under any of the machines.
11. The Hon’ble Supreme Court has held in the case of Wood Crafts 1995 (77) E.L.T. 323 (Para 18) that in case of any doubt in regard to classification of goods resort can be had to HSN as the Central Excise Tariff is based on HSN.
12. In view of the above discussions we hold Chillpac has been rightly classified under Heading 84.18 the benefit of Notification 175/86 has been rightly denied.
The learned Counsel made alternative plea that since duty is demanded now the abatements as are available under Section 4(4) (d) should be allowed and also Modvat credit notwithstanding non filing of the declaration also be allowed. We observe that under similar circumstances where duty is demanded subsequently we have allowed abatements as are admissible under Section 4(4)(d) when duty is computed in respect of the goods consequent on the proceedings drawn by the authorities and also we have allowed benefit of Modvat credit notwithstanding non filing of the declaration subject to compliance with the other rules relating to Modvat scheme. We order that the lower authority should consider these two pleas of the appellants in the light of the above and the duty should be demanded after taking into consideration the abatements which are allowable and the Modvat credit which would be available in terms of what we have stated above. But for the above modifications, the appeal of the appellants is otherwise rejected.