2007 (12) TMI 8 - SC - Central Excise

Supreme Court classifies split air-conditioners under Tariff Heading 84.15

The Supreme Court upheld the findings that the appellant was manufacturing split air-conditioners classifiable under Tariff Heading 84.15 of the Central ... Split air conditioners – Joining together of cooling units with pipe-kits, remote control etc. leads to the production of commercially new article – Above process is nothing other than manufacture Issues involved: Determination of whether the appellant was manufacturing split air-conditioners classifiable under Tariff Heading 84.15 of the Central Excise Tariff Act.Comprehensive Analysis:1. Manufacturing of Split Air-Conditioners: The appellant, in this case, was alleged to have clandestinely removed split air-conditioners without paying central excise duty. The investigation revealed that the appellant's Mumbai Branch received condensing units from their manufacturing unit in New Delhi and procured cooling units locally to assemble complete split air-conditioners. The process involved conducting quality checks, affixing the brand name, and delivering the units to customers in Gujarat and Goa. The statements of various individuals confirmed the manufacturing process at the Mumbai workshop-godown, where the final product came into existence.2. Definition of 'Manufacture': Section 2(f) of the Central Excise Act defines 'manufacture' inclusively, encompassing processes incidental to completing a manufactured product. The Tribunal relied on this definition to determine whether the appellant's activities constituted manufacturing. The appellant's argument that no substantial change occurred in the product's name, character, or use was dismissed, emphasizing that the assembly of condensing and cooling units into a complete air conditioner constituted manufacturing, creating a commercially new article.3. Application of Rule of Interpretation: The Tribunal referenced Rule 2(a) of the Rules of Interpretation, which the appellant contested as inapplicable. However, the Supreme Court found that the matter could be decided without invoking this rule. The Court affirmed the concurrent findings of the lower authorities based on the depositions of the appellant's employees and suppliers, concluding that the appellant was indeed manufacturing split air-conditioners as alleged in the show cause notice.4. Final Decision: After a detailed analysis of the manufacturing process, the Court dismissed the appeals, upholding the findings that the appellant was manufacturing split air-conditioners. The judgment highlighted the assembly process, the creation of a new product, and the evidentiary support from statements and invoices. The decision was made without awarding costs to either party, affirming the lower authorities' conclusions on the matter.In conclusion, the Supreme Court's judgment affirmed that the appellant's activities constituted manufacturing of split air-conditioners, emphasizing the assembly process and the creation of a new commercial product. The legal analysis delved into the definition of 'manufacture,' the application of relevant rules, and the evidentiary support for the manufacturing process.