FEDDERS LLOYD CORPORATION LTD. versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI

The present appeals under Section 35L(b) of the Central Excise Act, 1944 (for short "the Act") have been filed by the assessee against the impugned final Order nos. 242-244/2001-B dated 1st May, 2001 in appeal Nos. E/761-763/98-B passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (for short ''the Tribunal"), rejecting the appeals filed by the appellant on merits and limitation

p. 786

The issue before the Tribunal was, whether the appellant was manufacturing split air-conditioners classifiable under TariffHeading 84.15 of the Central Excise Tariff Act.

p. 786, margin C

The appellant, Fedders Lloyd Corporation Ltd., cleared condensing units from their unit at Kalkaji, New Delhi to Mumbai, where the appellant purchased cooling units from local manufacturers fabricated on order with motors, etc., supplied by the appellant. After carrying out certain tests for quality by filling gas, affixing the brand name 'Fedders Lloyd', the complete unit was cleared along with pipe kits, electrical cord, remote control, etc., to various customers from their warehouse/godown at Mumbai. The invoices were raised by the appellant's Mumbai office for supply of split air-conditioners.

p. 786, margin C

A show cause notice dated 3rd April, 1996 was issued to the appellant, alleging that 412 nos. split air-conditioners were clandestinely removed by the appellant without payment of duty, involving evasion of central excise duty to the tune of Rs.56,14,293/- during the period October 1991 to April 1996. It was also stated that the department was unaware of the fact that the appellant was manufacturing split airconditioners.

p. 786, margin F

The demand raised in the show cause notice was confirmed in the order-in-original. Appeals filed by the appellant before the Tribunal were dismissed. Aggrieved against the same, the present appeals have been filed.

p. 787, margin A

Counsels for the parties have been heard at length.

p. 787, margin A

Records reveal that during the course of investigation, statements of Shri Shivshankar Upadhyay, partner of New Gold Air Conditioners, who had supplied the cooling units to the Mumbai Branch of the appellant, was recorded wherein he confirmed that they had filed a declaration with the excise authorities that they were manufacturing sheet metal bodies of air-conditioners. He also confirmed that the electric motors to be fitted with cooling units were supplied by the appellant. Statement ofShri R.P. Gupta, Commercial Manager of the appellant, was also recorded wherein he had stated t.'1at the appellant had supplied electrical motors to be fitted with the cooling units to the local manufacturers so that check on the quality can be kept. These cooling units were received by them at their godown at Kunjunnarg from where complete units of split air-conditioners were supplied to various customers. That the complete units of split airconditioners were delivered after putting together condensing units received from New Delhi and cooling units procured locally along with other associates and that their invoice was raised from Mumbai administrative office. Shri K.A. Bhatia, Project Manager of Air Serco Pvt. Ltd., whose statement was also recorded, stated that after receiving the air-conditioners complete in all respect along with necessary accessories, were supplied by the appellant to Air Serco Pvt. Ltd., which is a sister concern of the appellant and undertakes the job of installation and servicing of air-conditioners at Mumbai. Statement ofShri K. Vijayan, Commercial Executive of the appellant, was also recorded wherein he stated, inter alia, that he was looking after the finished stores of the appellant at Devidayal Compound, Kanjumarg, situated in the premises of Mis. Air Serco Pvt. Ltd. and that his job was to look after the stock of the finished goods received in the godown from New Delhi and from local manufacturers such as New Gold Air-conditioners, and to maintain relevant records. He further stated that at Kanjumarg godown, before delivery of the split air-conditioners, gas is filled in the condenser for carrying out A certain checks for leakage of gas.

pp. 787–788, margin B

From the statements of S/Shri Shivshankar Upadhyay, RP. Gupta, K.A. Bhatia and K. Vijayan, it is evident that the appellant's Mumbai Branch received condensing units cleared from their manufacturing unit at B New Delhi on payment of appropriate central excise duty as parts of airconditioners and procured cooling units manufactured locally at Mumbai. At their workshop-cum-godown, certain checks for quality were conducted by filling the gas and the brand name "Fedders Lloyd" was affixed on the cooling units and, thereafter, these units were cleared along with pipe kits, electrical cord, remote control etc. to various customers and the same was installed by the appellant's sister concern, Mis. Air Serco Pvt. Ltd., on behalf of the appellant. The invoice was raised by the appellant's Mumbai office for supply of split air-conditioners. No excise duty was paid on such split air-conditioners as they were supplied from Mumbai to their various customers in Gujarat and Goa. The statements of these persons clearly show that a complete split air-conditioner came into existence at Kanjumarg Workshop of the appellant.

p. 788

We do not find any substance in the submissions advanced on behalf of the appellant that no change in the name, character and use of the product or transformation of the raw material into finished product came into existence; the cooling units or condensing units by themselves cannot function as air-conditioners. They have to be joined together with pipe kits, electrical cord and remote control, etc. to function as a complete air conditioner unit. This process was carried at the factory-cum-godown of the appellant at Kunjurmarg.

p. 788, margin D

Section 2(t) of the Central Excise Act defines "manufacutre" as: "(t) "manufacture" includes any process, -- (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 (5of1986) as amounting to manufacture"

p. 788, margin F

Clause (t) gives an inclusive definition of According to the dictionary, the tenn "manufacture" which results in an alteration or change in the goods to the process of manufacturing leading to commercially new article. As to what constitutes depend upon the facts of each case. As noticed earlier, were manufactured by the appellant at its factory cooling units were procured from the local market motors were supplied by the appellant. Neither the the cooling unit by itself is a complete air conditioner. two, i.e. condensing unit and cooling units are put unit of air conditioner fit for use came into existence workshop. Air conditioner is a commercially new condensing unit or the cooling unit.

p. 789, margin A

For the reasons state above, the contention there is no manufacture at their Bombay Unit stands be accepted.

p. 789, margin C

The Tribunal in its order has relied upon oflnterpretation. Counsel for the appellant has rule is not applicable. In our view, reference to rule 2(a) is not necessary and the matter can be decided to that rule. The issue of clearing complete units Bombay Branch of the appellant was evident from appellant's own employees and the partners ofNew who had supplied the cooling units and the invoice

p. 789, margin D

For the foregoing reasons, we have no reason concurrent findings on facts recorded by the authorities appellant was indeed manufacturing the split air-conditioners, the show cause notice.

p. 789, margin F

The appeals are dismissed, accordingly, with S.K.S.

p. 789, margin G