Appeal upheld: Central Air-conditioning Plants not subject to excise duty

The appeal filed by M/s. Blue Star Ltd. regarding the excisability of Central Air-conditioning Plants (CAP) was upheld. The Tribunal determined that the CAPs were not marketable and therefore not chargeable to excise duty. The penalty of Rs. 50 lakhs imposed under rule 173Q was set aside. The majority decision concluded that the CAPs installed by the appellants were not marketable and not subject to any excise duty, resulting in the appeal being allowed.

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Issues Involved:
1. Excisability of Central Air-conditioning Plant (CAP)
2. Marketability of CAP
3. Imposition of Duty and Penalty

Summary:

1. Excisability of Central Air-conditioning Plant (CAP):
The primary issue in the appeal filed by M/s. Blue Star Ltd. was the excisability of Central Air-conditioning Plants (CAP). The Commissioner of Central Excise, Jaipur, imposed duty and penalty on the appellants for the period from 2-4-98 to 21-5-99. The appellants were engaged in the manufacture and assembly of CAPs at customer sites using components supplied from their Thane unit and various vendors. The CAPs were classified under Chapter Heading 8415 of the CETA, 1985, and were chargeable to 30% ad valorem duty. The appellants argued that the CAPs became part of the immovable property upon installation and could not be considered "goods" or "excisable goods."

2. Marketability of CAP:
The Tribunal examined whether the CAPs were marketable. The facts were compared to the case of Sirpur Paper Mills, where the Supreme Court held that plant and machinery fixed to the earth for better functioning do not automatically become immovable property. The Commissioner concluded that the CAPs were excisable. However, Member (Technical) V.K. Agrawal dissented, citing the Supreme Court's decision in Triveni Engineering and Industries Ltd., which required goods to be capable of being brought to the market for sale. Agrawal argued that the CAPs, when dismantled, would not remain as CAPs but as individual components, failing the marketability test.

3. Imposition of Duty and Penalty:
The Commissioner imposed duty and penalty on the appellants. During the arguments, the learned DR conceded that penalty could not be imposed simultaneously u/s 11AC and u/r 173Q. The Tribunal, while upholding the excisability of CAPs, set aside the penalty of Rs. 50 lakhs imposed u/r 173Q. The appeal was dismissed except for the penalty aspect.

Majority Decision:
The matter was referred to a third member, P.G. Chacko, to resolve the difference of opinion on the marketability of CAPs. Chacko concurred with Member (Technical) Agrawal, holding that the CAPs were not marketable and, consequently, not chargeable to excise duty. The majority order concluded that the CAPs installed by the appellants in customers' premises were not marketable and not chargeable to any duty of excise, thereby allowing the appeal.

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