2024 (9) TMI 944 - AT - Customs

Car air conditioning compressors classified under CTH 8414 8011 as gas compressors per Note 2(a) Section XVII

The CESTAT Chennai ruled on classification of imported car air conditioning compressors between CTH 8415 9000 (revenue's position) and CTH 8414 8011 ... Classification of imported goods - COMPR & CL ASY A/C (Motor vehicle components) - to be classified under Chapter Headings 8421 9900, 8409 9990 and 8414 9090 or under CTH 84159000? - classification of the impugned goods claimed by the Appellant earlier under a different CTH would operate as an estoppel or not - applicability of 'predominant use' or ‘sole/principal’ use test stated in Westinghouse Saxby Farmers [2021 (3) TMI 291 - SUPREME COURT]. Whether the imported compressors are to be classified under CTH 8415 9000 (revenue) or CTH 8414 8011 (appellant)? - HELD THAT:- It is seen that Heading 8415 covers Air-conditioning machines, comprising a motor-driven fan and elements for changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated. While 8414 covers Air or vacuum pumps; air or other gas compressors and fans etc. and parts thereof. Hence compressors used in car air conditioning units are reasonably classifiable under two competing headings and recourse to Section or Chapter Notes would be necessary to determine the classification. Revenue is of the view that as per the HSN notes to chapter 841590, the components of air conditioning machines, if presented as separate elements are to be classified in their respective headings in accordance with the provisions of Note 2(a) to Section XVI whether or not they are designed for building into a self-contained units i.e. air conditioning machine. Hence compressor in this case, which are parts imported and presented as separate elements are in all cases to be classified in their respective headings i.e. CTH 8415 9000 as 'parts” of air-conditioning machines of a kind used for persons in motor vehicles - Hence the subject goods, being Air Compressors used for Car Air Conditioning Equipment, are rightly classifiable under its respective heading CTI 8414 8011 as gas compressors of a kind used in air-conditioning equipment as per Note 2(a) to Section XVII of CTA, 1985. In SANTHOSH MAIZE & INDUSTRIES LIMITED VERSUS THE STATE OF TAMIL NADU & ANR. [2023 (7) TMI 191 - SUPREME COURT], it was held that law is well settled that if in any statutory rule or statutory notification two expressions are used one in general words and the other in special terms under the rules of interpretation, it has to be understood that the special terms were not meant to be included in the general expression; alternatively, it can be said that where a statute contains both a general provision as well as a specific provision, the latter must prevail. The Hon’ble Supreme Court in the case of OK. PLAY (INDIA) LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III, GURGAON [2005 (2) TMI 114 - SUPREME COURT (LB)], held that the scheme of the Central Excise Tariff [which is equally applicable to the Customs Tariff] is based on Harmonized System of Nomenclature and the explanatory notes thereto. Therefore, HSN along with the explanatory notes provide a safe guide for interpretation of an Entry. This being so we find force in classifying the impugned goods based on the HSN Explanatory Notes to Section XVI. Whether the classification of the impugned goods claimed by the Appellant earlier under different CTH would operate as an estoppel? - HELD THAT:- The issue is no loner res integra. There is no estoppel in Law against a party in taxation matters. In this regard, reliance is placed on the case of DUNLOP INDIA LTD. & MADRAS RUBBER FACTORY LTD. VERSUS UNION OF INDIA AND OTHERS [1975 (10) TMI 94 - SUPREME COURT], wherein it was held 'There is, however, no estoppel in law against a party in a taxation matter. In order to clear the goods for the Customs, the appellant Agents may have given the classification in accordance with the wishes of the authorities or they may even be under some misapprehension. But when law allows them the right to ask for refund on a proper appraisement and which they actually applied for, we do not attach any significance to this aspect of the matter pointed out by counsel. The question is of general importance and must be decided on its merits.' Whether the ‘predominant use’ or ‘sole or principal’ use test stated in Westinghouse Saxby Farmers will be applicable to the present case? - HELD THAT:- The Hon’ble Supreme Court in Westinghouse Saxby Farmers held that ‘relays’ are classifiable as parts of ‘railway signalling equipment’ under Heading 8608 of the Central Excise Tariff, by applying the ‘sole or principal use’ test of Section Note 3 in precedence over Note 2(f) ibid of Section XVII. However, the impugned issue pertains to the classification of goods under Section XVI. When the two Section Notes are not in pari materia, then decision rendered with reference to one Section Note of the Schedule to the Central Excise Tariff Act, cannot be applied with reference to the provisions of another Section Note of the schedule to the Customs Tariff Act - the ratio of the judgment of the Hon’ble Supreme Court in Westinghouse Saxby Farmers would not be applicable in deciding the issue in this case. Thus, revenue has not been able to establish its case and the impugned order merits to be set aside - the impugned order is set aside - appeal allowed. Issues Involved:A) Classification of imported compressors under CTH 8415 9000 (revenue) or CTH 8414 8011 (appellant).B) Whether the appellant's earlier classification under a different CTH operates as an estoppel.C) Applicability of the 'predominant use' or 'sole/principal use' test from Westinghouse Saxby Farmers (supra) to the present case.Detailed Analysis:Issue A: Classification of Imported Compressors5.1 The core issue is whether the imported compressors used in car air-conditioners are to be classified under CTH 8415 9000 as 'parts of air-conditioning machines for use in motor vehicles' (revenue's stance) or under CTH 8414 8011 as 'air or other gas compressors' (appellant's stance).5.2-5.3 The classification headings are examined. Heading 8415 covers air-conditioning machines, while Heading 8414 covers air or vacuum pumps and compressors. The compressors in question can reasonably be classified under both headings, necessitating recourse to Section or Chapter Notes.5.4-5.5 Revenue argues that according to HSN notes to chapter 841590, components of air-conditioning machines presented as separate elements should be classified under CTH 8415 9000. The appellant counters that air compressors are a type of gas compressor and should be classified under CTH 8414 8011.5.6-5.7 The principle of literal construction is emphasized, stating that statutory authorities must adhere to the legislative mandate without adding or subtracting words. There is no indication in CTH 8414 that limits the heading to industrial use only.5.8 The principle that specific provisions prevail over general ones is highlighted, supporting the appellant's classification.5.9-5.10 The Customs Tariff is based on the Harmonized System of Nomenclature (HSN), and explanatory notes provide guidance for interpretation. The Supreme Court's rulings in related cases underscore the importance of adhering to HSN explanatory notes, which support the appellant's classification under CTH 8414 8011.Issue B: Estoppel in Classification6.1 The principle that there is no estoppel in law against a party in taxation matters is reiterated. The Supreme Court in Dunlop India Ltd. v. Union of India held that previous classifications do not prevent reclassification if the law allows for it.Issue C: Applicability of 'Predominant Use' Test7.1-7.2 Revenue argues that the 'sole or principal use' test from Westinghouse Saxby Farmers should apply, classifying the compressors under CTH 8415 9000. The appellant contends that this test pertains to Section XVII of the Central Excise Tariff Act, not Section XVI of the Customs Tariff Act.7.3 The court agrees with the appellant, noting that the two section notes are not in pari materia. The precedent set in Westinghouse Saxby Farmers does not apply to the present case, which involves different statutory provisions.Conclusion:8. The court finds that the revenue has not established its case, and the impugned order is set aside.9. The appeal is allowed, and the appellant is eligible for consequential relief as per law. The appeal is disposed of accordingly.Order Pronounced:(Order pronounced in open court on 11.09.2024)