Lloyd Corportion Ltd Vs. Commissioner of Central Excise, Mumbai  Insc 1206
(3 December 2007)
Bhan & V.S. Sirpurkar
APPEAL NO(S). 8066-8068 of 2001 BHAN, J.
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.
issue before the Tribunal was, whether the appellant was manufacturing split
air-conditioners classifiable under Tariff Heading 84.15 of the Central Excise
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.
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 air-conditioners.
demand raised in the show cause notice was confirmed in the order-in-original.
Appeals filed by the appellant before the Tribunal were dismissed.
against the same, the present appeals have been filed.
Counsels for the parties have been heard at length.
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.
also confirmed that the electric motors to be fitted with cooling units were
supplied by the appellant.
of Shri R.P. Gupta, Commercial Manager of the appellant, was also recorded
wherein he had stated that 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 Kunjurmarg
from where complete units of split air- conditioners were supplied to various
customers. That the complete units of split air-conditioners 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
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 of Shri
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 M/s.
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 certain
checks for leakage of gas.
From the statements of S/Shri Shivshankar Upadhyay, R.P. 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 New Delhi on payment of appropriate central
excise duty as parts of air-conditioners 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, M/s.
Air Serco Pvt. Ltd., on behalf of the appellant.
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.
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
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.
Section 2(f) of the Central Excise Act defines "manufacutre" as:
"manufacture" includes any process, --
or ancillary to the completion of a manufactured product; and
which is specified in relation to any goods in the Section or Chapter notes of
the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to
Clause (f) gives an inclusive definition of the term "manufacture". According
to the dictionary, the term "manufacture" means a process which
results in an alteration or change in the goods which are subjected to the
process of manufacturing leading to the production of a commercially new
article. As to what constitutes manufacture would depend upon the facts of each
noticed earlier, condensing units were manufactured by the appellant at its
factory at New Delhi and the cooling units were procured
from the local market for which the electrical motors were supplied by the
appellant. Neither the condensing unit nor the cooling unit by itself is a
complete air conditioner. It is only when these two, i.e. condensing unit and
cooling units are put together the complete unit of air conditioner fit for use
came into existence at the Kanjumarg workshop. Air conditioner is a
commercially new article than either the condensing unit or the cooling unit.
For the reasons state above, the contention of the appellant that there is no
manufacture at their Bombay Unit stands belied and cannot be accepted.
The Tribunal in its order has relied upon Rule 2(a) of the Rules of
Interpretation. Counsel for the appellant has contended that the said rule is
not applicable. In our view, reference to the applicability of the rule 2(a) is
not necessary and the matter can be decided without reference to that rule. The
issue of clearing complete units of air-conditioners from Bombay Branch of the
appellant was evident from the depositions of the appellant's own employees and
the partners of New Gold Air-conditioners who had supplied the cooling units
and the invoice raised by the appellant.
For the foregoing reasons, we have no reason to differ with the concurrent
findings on facts recorded by the authorities below that the appellant was
indeed manufacturing the split air-conditioners, as stated in the show cause
The appeals are dismissed, accordingly, with no order as to costs.