Air-conditioning machine parts exemption turns on SKD or CKD classification and separate trading supplies in the kit

Exemption for parts of air-conditioning machines depends on whether the supplied kit contains the essential components needed to treat it as a complete air-conditioning machine in SKD or CKD condition. The note explains that where some components are manufactured in one factory and other items are imported and supplied separately from another trading premises, invoices and the absence of Cenvat credit can support classification as parts rather than complete machines. On the material described, the record supported a strong prima facie case for waiver of pre-deposit and stay of recovery.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery by claiming exemption for parts of air-conditioning machines, and whether the goods supplied were to be treated as complete air-conditioning machines in SKD or CKD condition.

Analysis: The dispute related to supplies made to two automobile manufacturers, where some components were manufactured in the factory and certain other components were imported and supplied from a separate trading premises. The exemption notifications covered only parts of air-conditioning machines. The Board's circular clarified that a kit would be treated as a complete air-conditioning machine only if it contained the specified essential components, and if any of those components were absent, the kit would be classifiable as parts. On the material placed before it, the appellant had supplied the traded items from a different premises, no cenvat credit had been taken on those items, and the invoices showed separate trading activity. The available record therefore supported the view that the supplies were not complete air-conditioning machines in SKD or CKD condition.

Conclusion: The appellant had established a strong prima facie case. Pre-deposit of duty and interest was waived and recovery was stayed.

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