Exemption notification controls classification of car air-conditioning kits cleared without compressors; tariff rules cannot override its plain scheme.

A car air-conditioning kit cleared without the automotive gas compressor remained classifiable under serial no. 8 of Notification No. 166/86-CE, because the notification separately treated compressors, complete air-conditioners, car air-conditioning kits, and parts. The Court noted that the kits and compressors were cleared through separate gate passes and at separate prices, showing distinct transactions. It held that Rule 2(a) and Section Note 4 to Section XVI of the Central Excise Tariff Act could not be imported to defeat the notification's plain scheme. The compressor was separately dutiable under serial no. 1, and the exemption classification for the kit was preserved.

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Issues: Whether, for the relevant period under Notification No. 166/86-CE, a car air-conditioning kit cleared without the automotive gas compressor could be treated as falling under serial no. 8 and whether Rule 2(a) and Section Note 4 to Section XVI of the Central Excise Tariff Act, 1985 could be applied to move the kit into serial no. 3.

Analysis: The Notification treated gas compressors, complete air-conditioners, parts and accessories of air-conditioning machinery, and parts and accessories of car air-conditioners under separate serial entries. The Explanation inserted on 25.07.1991 excluded from the expression "car air-conditioner kit" or "car air-conditioning kit" only a kit or assembly containing an automotive gas compressor with or without magnetic clutch. The Tribunal had found that during the disputed period the respondent cleared car air-conditioning kits without compressors and compressors separately under different gate passes and different pricing. In that situation, the Court held that the kit and compressor were separate transactions and the notification had to be applied according to its own language. The Court further held that Rule 2(a) and Section Note 4 to Section XVI could not be imported to override the scheme of the exemption notification, because the notification itself maintained a distinction between complete air-conditioners, car air-conditioning kits, parts and accessories, and compressors.

Conclusion: The car air-conditioning kit cleared without the compressor remained classifiable under serial no. 8, the compressor was separately dutiable under serial no. 1, and the revenue's appeal did not succeed.

Ratio Decidendi: Where a notification separately subjects a kit and the compressor to different entries and they are cleared under separate invoices or separate pricing, the kit does not lose its serial-specific exemption classification merely because the compressor is capable of being used with it; the exemption notification must be construed on its own terms and not by importing tariff interpretative rules that would defeat its plain scheme.

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