Sub-assemblies versus complete units: demand set aside for failure to decide whether the circular applied

The demand could not be confirmed merely by reproducing the Board circular, because the decisive issue was whether the cleared goods were complete split air-conditioner units or only sub-assemblies requiring further components. If they were only sub-assemblies, the circular and the concessional notification would not apply. The Commissioner failed to examine this vital factual controversy or record a finding on it, making the order unsustainable. The matter was therefore remanded for fresh decision in a speaking order after proper consideration of the assessee's contention.

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Issues: Whether the Commissioner could confirm the demand by relying on the Board circular without examining the assessee's contention that the cleared goods were only sub-assemblies and not complete units of split air-conditioners.

Analysis: The assessee's plea went to the root of the applicability of the circular and the concessional notification. If the goods cleared were not complete units but only sub-assemblies requiring further components before they could constitute a split air-conditioner unit, the circular dealing with separately cleared split air-conditioner units would not apply. The Commissioner was required to examine this factual controversy and record a finding, but instead reproduced the circular and confirmed the demand without adjudicating the material submission.

Conclusion: The impugned order was unsustainable for failure to consider and decide a vital factual issue, and the matter had to be remanded for fresh decision in a speaking order.

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