TaxTMI 
TaxTMI 
2023 (6) TMI 319
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....cation, all goods classifiable under CTH 841590 are exempted from whole of BCD. The Bill of Entry was forwarded to Assessing Groups for verification by the RMS. In the course of online verification of self- assessment, a query was raised to the appellant calling for all the documents and the certificate of origins issued to them. They were also requested to justify their self-assessment as to how the goods can be classified under CTH 841590 as "parts of Air-conditioners". 2. In response, the appellant/importer furnished documents and explained that the goods are 'parts of air-conditioners' and put forward the following submissions: • The product they imported are City Multi VRF (Variable Refrigerant Flow) Air-conditioning System. • City Multi VRF Variable Refrigerant Flow (VRF) is a multi and direct expansion type air conditioning system in which one outdoor unit is connected with multiple indoor units. The amount of refrigerant can be regulated according to the load on the indoor unit by inverter driven compressor in the outdoor unit. Individual indoor units can stop and start their operation as needed. • Under City Multi VRF Air-condition....
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....nd determined the classification of Multi Split Air-conditioner-Outdoor unit of PUHY series (with reversible heat pump) under CTH 8415 8110, Multi Split Air conditioner-Outdoor units of PUCY series (without reversible heat pump) under CTH 8415 8210 and the Control Panels under CTH 8415 8110. The exemption benefit claimed under FTA Notification No.46/2011 Sl.No.1103 (I) was thus denied. 4. Aggrieved by such order, the appellant filed appeal before the Commissioner (Appeals) who vide order impugned herein dismissed the appeal upholding the classification arrived at by the adjudicating authority. Hence the appellants are now before the Tribunal. 5. Ld. Counsel Shri Ankit Sachdeva along with Shri Neeladri Chakrabarti, Advocate appeared and argued the matter. Ld. Counsel for the appellant submitted that in the instant case, though the show cause notice dated 27.04.2015 is issued by D.R.I, appellant do not intend to contest the issue as to whether show cause notice issued by D.R.I is proper and valid. The appellant has filed an affidavit to this effect that they are not contesting the said issue and would not pursue this issue in any proceedings further. 6. The Ld. Counsel thus ....
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....Multi Variable Refrigerant Flow (CMVRF) Air Conditioning systems. The outdoor units and indoor units imported are not factory matched. The outdoor and indoor units would be matched depending on load requirements at the customer's premises. At the time of import, the appellants would not be able to know to which customer these outdoor and indoor units would be supplied. The outdoor and indoor units are kept in a warehouse and depending on the order requirements, the appellant would select outdoor and indoor units for installation at the customer's premises. Therefore, matching of all the Outdoor and Indoor units happen only after the order is placed by the customer and only at the time of installation at the customer's premises. 9. The features of the goods are explained as under : "i. CMVRF is a multi and direct expansion type air conditioning system in which one or more outdoor unit is connected with multiple indoor units. The amount of refrigerant can be regulated freely according to the load on the indoor unit by inverter driven compressor in the outdoor unit. Individual indoor units can stop and start their operation as needed. ii. Under CMVRF, various opti....
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....nder CTH 84159000. 12. The Commissioner (Appeals) has confirmed the view in the SCN and reclassified the goods within the diversity ratio of 50% - 130% under heading 84158110 and 84158210. On the other hand, the adjudicating authority had held that the impugned goods in excess of the diversity ratio after matching with the Outdoor units may be classified under CTH 84159000. 13. The Ld. Counsel explained that the Air-conditioning system imported by the appellant is known as the "Variable Refrigerant Flow (VRF) system" which is an air-conditioning system configuration with one outdoor condensing unit and multiple indoor units. VRF systems are inherently different from multi-split air conditioning systems. The multi-split systems are covered under CTH 841581 or 841582, as the case may be. 14. Ductless products are fundamentally different from ducted systems in which the heat is transferred to or from the space directly by circulating the refrigerant to evaporators located near or within the conditioned space. In contrast, the conventional systems transfer heat from the space to the refrigerant by circulating air (inducted systems) or water (in chillers) throughout the buildin....
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....pects applicable to the VRF systems and also the essential differences between VRF systems and the multi-split systems. The VRF systems cannot be imported as complete systems for the reason that they can be matched and assembled only at the site of the customers after taking into account the load requirements. Thus, the goods imported are parts of air-conditioner. 17. To support this contention, Ld. Counsel has referred to the HSN Explanatory Notes which reads as under : "Alternatively, they may be in the form of "split systems" which operate when connected together, i.e., a condenser unit for external installation plus an evaporator for internal installation. These "split systems" are ductless and utilize a separate evaporator for each area to be air conditioned (e.g. each room)." It is explained by the Ld. Counsel that from the above HSN Explanatory Notes, it can be seen that, split air-condoning systems, which are to be classified under CTH 84151010, are those systems which (a) have a condenser and an evaporator connected together (b) are ductless and (c) use one evaporator for each room to be air-conditioned. In other words, the system is 'one to one' (which mean....
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....LFY- P80VBM-E 20 30,700 2.56 51.20 PUCY- P450YKA 16 1,63,800 13.65 218.4 PLFY- P100VBM-E 60 38,200 3.18 190.80 PUHY- P300YKA 4 1,14,300 9.525 38.1 PLFY- P125VBM-E 120 47,800 3.98 477.60 PUHY- P400YKA 4 1,53,500 12.79 51.16 PLFY- P25VCM-E2 8 9,600 0.8 6.40 PLFY- P32VBM-E 6 12300 1.03 6.18 PLFY- P40VBM-E2 10 15,400 1.28 12.8 Total No of units 46 304 Total capacity of Outdoor Units 513.22 Total capacity of Indoor Units 898.97 13% of 513.22 667.186 Diversity ratio of the Indoor units imported 175% 20. It is thus submitted that total capacity of the outdoor units as per the above table is 513.22 TR, whereas the total capacity of indoor units is 892.97 TR, which is way above the maximum diversity ratio of 130%. The actual total capacity of indoor unit is 175% of the total outdoor units capacity and way beyond the maximum diversit....
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....d both sides. 25. The show cause notice is issued by D.R.I. The appellant has filed an affidavit stating that the issue whether the SCN issued by D.R.I is proper and valid is not contested by the appellant before this Tribunal and do not intend to contest the said issue in any other forum in regard to this appeal. We therefore proceed to aanalyse the merits of the case. 26. The very same goods were imported by the appellant and the Tribunal vide Final Order No.A/85491-85498/2022 dated 28.02.2022 has considered the issue as to the classification of the impugned goods. The relevant paragraphs are noticed as under : "4.13 On the issue of the goods declared as "parts" of CMVRF, claiming classification under heading 84151010 or 84159000, adjudicating authority has determined the classification under heading 84158110. For the period prior to 2013, appellants were importing the parts of CMVRF as complete unit, and claimed classification under the heading 84151010. Post 2013, appellant changed the practice, and started importing the goods as parts under different Bill of Entries. Thus post 2013, the impugned goods which were imported were never presented for assessment as co....
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....y operations are involved." Learned counsel further points out that in a decision in CCE v. Woodcraft [(1995) 3 SCC 454] this Court took the view that HSN Explanatory Notes should be referred to for understanding the true scope and meaning of expressions used in the Customs Tariff. He further points out that the Revenue did not dispute the fact that complicated processing of imported parts had to be done before they could be fit in the assembly of CTVs. Shri Vikas Singh, learned ASG also did not dispute this fact during the debate before us that a complicated process had to be exercised before these components could be brought in use for CTVs. There is also a specific finding by the Tribunal on this issue. In that view since the concerned Explanatory Note was applicable, there would be no question of treating these notes to be in unassembled or disassembled condition since a complicated process had to be exercised and then before it could be used for the assembly of the CTVs. Of course this Explanatory Note was further amended by adding the words "no account is to be taken in that regard of the complexity of the assembly method. However, the components would not be subject....
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....3-1988 would not be available. Very interestingly, it was claimed by the importer that it had imported the fax machine and not the components obviously because the duty payable on the components was more. The Tribunal came to the conclusion that in view of Section Note 2 to Section XVI Rule 2(a) would not apply and confirmed the import of goods as components. While interpreting Explanatory Note to Rule 2(a), the Tribunal had held that this Rule would apply only when the imported articles presented in unassembled or disassembled can be put together by means of simple fixing device or riveting or welding. It came to the conclusion that fax machines were not the type of goods which were normally traded or transported in knocked down condition and therefore, the imports were that of the components and not of fax machines. Shri Lakshmikumaran also invites our attention to the fact that Chapter 64 dealing with footwear does not have a note similar to Note 2 in Section XVI. Thus this position would render support to the proposition that Rule 2(a) would apply only when the imported articles presented unassembled or disassembled can be put together by means of simple fixing device or by riv....