M/S.Thermax Ltd. Thr. Its Director vs Commissioner Of Central Excise,Pune 1

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6048-6050_OF 2009

M/s Thermax Ltd. through its Director Appellant(s)

VERSUS

Commissioner of Central Excise, Pune-1 Respondent(s)

J U D G M E N T

Hrishikesh Roy, J.

1. Heard Mr. V. Sridharan, the learned Senior Counsel

representing the appellant. Also heard Mr. V. Chandra

Shekara Bharathi, learned counsel representing the

Revenue.

2. This appeal is filed under Section 35L of the

Central Excise Act, 1944 and the issue to be considered Signature Not Verified Digitally signed by SNEHA Date: 2022.10.13 15:25:59 IST Reason: here is whether the product manufactured by the

Page 1 of 28 appellant is classifiable as heat pump under the

heading 84.18 of the Schedule to the Central Excise

Tariff Act, 1985. The question is important for the

appellant because under notification 155/86-CE dated

1.3.1986, heat pumps falling under Chapter 8418,

enjoyed a limited exemption from the levy of excise

duty.

3. The appellant had sold their manufactured product

by describing them as heat pumps but the Assistant

Commissioner of Central Excise negated such

description. On appeal by the assessee, the

Commissioner of Central Excise (Appeals) however agreed

with the manufacturer’s claim. But in the appeal by

the Revenue, the Customs, Excise and Service Tax

Appellate Tribunal, Mumbai (for short “CESTAT”) has

reversed the decision. The conclusion in the impugned

order dated 22.1.2009, is that the product is not heat

pump and therefore, ineligible for concessional rate of

duty under Sl. No. 2 of Notification No. 155/86-CE

dated 1.3.1986. It was also held that the product is a

complete machine and cannot be treated as part of a

machine. It was accordingly declared that the

Page 2 of 28 manufacturer is disentitled to the concessional rate of

duty in terms of the notification, for their product.

Incidentally, the CESTAT also held that the value of

Lithium Bromide is not to be calculated in the

assessable value of the machine. However, to facilitate

computation of the payable sum of duty by the

manufacturer, the matter has been remanded to the

adjudicating authority. Earlier, the appellant had

preferred a writ petition before the Bombay High Court

to challenge the decision of the CESTAT but because the

statutory remedy of appeal to this Court is available,

the High Court dismissed the writ petition on 26.3.2009

resulting in the present appeal.

APPELLANTS CONTENTION

4.1 Mr. V. Sridharan, the learned Senior Counsel

submits that appellant manufactures Modified Vapour

Absorption Chillers (for short “MVAC”) and this product

was presented for assessment as heat pumps classifiable

under Heading 8418, attracting lower rate of excise

duty as compared to chillers. The appellant asserts

that MVAC is bought, sold and described in their

Page 3 of 28 invoices and catalogues as heat pumps. It is their

further contention that the process of manufacturing

their product (MVAC) is distinct from manufacturing

ordinary chillers as they are installing additional

components in the Vapour Absorption Chillers (for

short “VAC”) such as, (I) Sensor to sense the

temperature, (II) Selector Switch to control panel

which can select heating/cooling mode, and (III)

Additional Wiring to carry the signals from the sensors

and these features warrant recognition of the machine

as “heat pumps”.

4.2 The learned Senior Counsel emphasizes that MVAC

has inbuilt capability whereby the customer can obtain

both chilled and also hot water as output for further

use by the end user. The Counsel relied upon a

technical book “Heat Pumps” authored by R.D. Heap and a

self-prepared chart describing the functioning of the

Heat Pump. Based upon the aforesaid, the counsel

contended that since the subject machine can provide

both chilled and hot water using refrigerator circle,

the interpretation against the appellant, ignoring

technical features of the product, would be

Page 4 of 28 unjustified. Pointing out that heat pumps are

classified with refrigerators, freezers and other

freezing equipments under Heading 8418 and not as

boilers under Heading 8402, it is argued that merely

because heat pumps are inherently capable of producing

cold water would not by itself justify its

classification in the manner suggested by the Revenue.

4.3 The appellants Counsel then refers to the

Harmonious System of Nomenclature (HSN) Explanatory

Notes to argue that therein the functioning of the heat

pumps is shown as heat plus energy, resulting in a

source of more intense heat. Because substantial

modification is carried out by the manufacturer to

transform chillers into MVAC and the four-way reversing

Valve, a key component in MVAC can provide heating and

cooling from the system to the air condition space by

reversing the flow direction of refrigerant and thereby

an air conditioner can fit into the description of heat

pumps. It is argued that classification of the product

should be based on the machine, as altered by the

additional components and the product presented should

be seen as a whole for the purpose of classification by

Page 5 of 28 taking into account its inbuilt functionality to

produce hot water. The senior counsel would rely on the

recognition of few customers of the product who say

that the product is purchased for getting both hot and

cold water.

4.4 To blunt the Revenue’s projection that the product

is capable of heating water by mere 5 degree celsius or

so and the same should not therefore be classified as

heat pumps, the appellant’s Counsel submits that the

MVAC is similarly capable of marginally cooling the

water also by around 5 degree celcius only and if the

theory propounded by the Revenue is to be applied, the

product - if it cannot be a heat pump, cannot also be a

chiller for the same reasoning.

4.5 Assailing the legality of the impugned decision by

the CESTAT, the appellant submits that Chapter Note 7

to Chapter 84 of the Central Excise Tariff Act, 1985

was wrongly relied upon in the impugned order as the

said aspect was neither counted upon in the show cause

notice nor was considered in the Order-in-Original and

also in the further proceedings by the Revenue. It is

Page 6 of 28 the further submission of the appellant that even as

per Chapter Note 7, the machine which is based upon

generation of heat in order to achieve cooling, should

be classified in the manner suggested by the

manufacturer.

4.6 Explaining the scope of Note 2 and Note 7 in the

HSN explanatory notes, Mr. V. Sridharan the learned

Senior Counsel submits that Note 7 cannot be made

applicable to products falling under Chapter 84.01 to

84.24 by referring to the following extract from Note

2:-

"Machines, which fall in two or more headings, none of which is within headings 84.01 to 84.24, are classified in that heading which provides the most specific description of the goods, or according to the principal use of the machine. Multipurpose machines which are used equally for a number of different purposes or industries (e.g. eyeleting machines used equally well in the paper, textile, leather, plastics, etc., industries) are classified in heading 84.79,"

4.7 The Senior Counsel has referred to the industry

related decision in the cases of Commissioner of

Central Excise, Mumbai Vs. Blue Star Ltd.1 and

1 (198) ELT 454

Page 7 of 28 Commissioner of Customs and Central Excise Vs. Voltas

Ltd.2 who are the principal competitors of the

appellant in the same field to point out that the

product manufactured by the said two companies are

identical to MVAC manufactured by the appellant, and in

the proceedings pertaining to those two companies, the

products manufactured by them were treated as heat

pumps, falling under Heading 84.18. What is more, the

issue has attained finality as the Revenue’s appeal

against the order of CIT(A) favouring the manufacturer,

was dismissed by the CESTAT and further appeal against

the order of the CESTAT was thereafter dismissed by

this Court. Accordingly, it is argued by the appellant

that since similar products as theirs were taxed at the

rate of 15 per cent, higher duty should not be levied

for the appellant’s similar machine, as the same would

be discriminatory, accordingly MVAC must also be

treated as Heat Pump.

RESPONDENTS CONTENTION

5.1 On the other hand, Mr. V. Chandra Shekara

Bharathi, the learned counsel, at the outset, submits

2 2005 (180) ELT 57

Page 8 of 28 that the Revenue does not dispute the classification of

the product under Chapter 8418 since there are no rival

entries. Notwithstanding such a stand, it is argued

that the MVAC manufactured by the appellant does not

qualify as heat pump to secure the benefit of limited

exemption, under the Notification 155/86-CE dated

1.3.1986.It is specifically contended that MVAC does

not satisfy the definition of heat pump given in the

HSN where heat pump is defined as under:-

“A heat pump is a device which draws heat from a suitable heat source (principally underground or surface water, the soil or the air) and converts it with the assistance of a supplementary energy source (e.g. gas or electricity) into a source of more intense heat.”

5.2 Taking a cue on the functional description of the

device in the HSN, the respondent submits that the

definition of the heat pumps is through a process of

heat plus energy resulting in a source of more intense

heat, but for the appellant’s device, the final output

is chilled water and therefore, MVAC would not qualify

as heat pump. The production of hot water from MVAC is

only an incidental purpose of the machine and this by

Page 9 of 28 itself, the respondents argue, would not justify

classification of the product as no customer has

purchased MVAC for the incidental purpose that it also

produces hot water, and the primary use of the product

is only for cooling/chilling purpose. It is also

pointed out that the product is understood and

recognized in market parlance as a Vapour Absorption

Chiller, used exclusively for air conditioning or

refrigeration purpose and the device is not known as a

heat pump.

5.3 Since an exhaustive definition of heat pump is

given in HSN, Mr. Bharathi argues that the said

definition should be the basis for classification of

the MVAC and deviation from the HSN definition to

classify product as heat pump, would be contrary to the

ratio in Collector of Central Excise, Shillong Vs. Wood

Craft Products Ltd.3 and Commissioner of Customs and

Central Excise, Amritsar (Punjab) Vs. D.L. Steels

etc.4. In these two decisions, it has been held that

when a definition is contained in the HSN, that

definition should prevail for the purpose of 3 (1995) 3 SCC 454 4 2022 SCC OnLine SC 863

Page 10 of 28 classification of the product and accordingly, it is

argued that any interpretation of heat pump, beyond the

scope of definition provided in the HSN, would not be

justified.

5.4 According to the respondent, the primary function

of MVAC is to produce chilled water and since

production of hot water is only incidental, the same

cannot provide an acceptable justification for

classification of the product as heat pump. It is also

pointed out by Mr. Bharathi on behalf of the Revenue

that the website of the appellant shows that both heat

pumps and Vapour Absorption Chillers are marketed

separately by the appellant and in the description of

the product Vapour Absorpotion Chillers, the appellant

does not mention about its heating capability. Likewise

in the description of heat pumps, the cooling

capability is not mentioned. According to the

respondent, the modification of the Vapour Absorption

Chillers (VAC) as Modified Vapour Absorption Chillers

(MVAC) does not in any way alter the primary

character/purpose of the device which is intended to

function as Vapour Absorption Chillers used exclusively

Page 11 of 28 for refrigeration and cooling. The incidental

production of hot water through modification of VAC is

not germane to warrant classification of VAC in the

category of heat pumps.

5.5 The learned counsel for the Revenue next contends

that the judgment of the Tribunal in Blue Star (supra)

and Voltas (supra) are distinguishable and should have

no application in determining the classification of the

MVAC manufactured by the appellant.

5.6 Adverting to Chapter Note 7 to Chapter 84, it is

also argued that production of chilled water is the

sole purpose of the MVAC and the product does not

qualify as heat pump, if the HSN definition is applied

as is necessary.

DISCUSSION

6. The definition of a product given in the HSN should

be given due weightage in the classification of a

product for the purpose of levying excise duty. This is

because in the Statement of Objects and Reasons of the

Bill leading to enactment of Central Excise Tariff Act,

1985, it was clearly stated that the pattern of tariff

Page 12 of 28 classification is broadly based on the system of

classification derived from the International

Convention on the Harmonised Commodity Description and

Coding System (Harmonised System) with such contraction

or modification thereto as are necessary, to fall

within the scope of the levy of central excise duty.

The tariff so suggested for the levy under the Indian

Tariff Act is based on an internationally accepted

nomenclature, in the formulation of which, all

considerations, technical and legal, have been taken

into account. This was done to reduce avoidable

disputes on tariff classification. Besides, the tariff

would be on the lines of the harmonized system. It

was also borne in mind that the tariff on the lines of

the harmonized system would bring about considerable

alignment, between the customs and central excise

tariffs, which in turn, would facilitate charging of

additional customs duty on imports, equivalent of

excise duty. It was therefore expressly stated in the

Statement of Objects and Reasons that the central

excise tariff are based on the HSN and the

internationally accepted nomenclature was as such taken

Page 13 of 28 into account, to reduce tariff classification disputes.

Thus, it was suggested that a safe guide for

classification is the internationally accepted

nomenclature emerging from the HSN and in case of

doubt, the HSN should be chosen advisory for

ascertaining the true meaning of any expression used in

the Tariff Act. In Wood Craft (supra), in the opinion

written by Justice J.S. Verma, the following was

pertinently opined in this context:

“12. ….. Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central excise tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning of the expression given in the HSN and the meaning of that term given in the Glossary of Terms of the ISI.

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Page 14 of 28

18. We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central excise tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression “similar laminated wood” in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian tariff of a different intention.”

7. Commenting on the importance of taking guidance from

HSN Classification and how a taxing statute should be

construed in consonance with their commonly accepted

meanings in the trade and popular sense, Justice Sanjiv

Khanna in D.L. Steels (supra) also so correctly

observed as follows:-

Page 15 of 28

“9. The Harmonised System of Nomenclature ,9 developed by the World

Customs Organisation, has been adopted in India by way of the Customs Tariff Act, 1975, though there are certain entries in the Schedules to this Act which have not been assigned HSN codes. The Harmonised System is governed by the International Convention on Harmonised Commodity Description and Coding System, which was adopted in 1983, and enforced in January, 1988. This multipurpose international product nomenclature harmonises description, classification, and coding of goods. While the primary objective of the HSN is to facilitate and aid trade, the Code is also extensively used by governments, international organisations, and the private sector for other diverse purposes like internal taxes, monitoring import tariffs, quota controls, rules of origin, transport statistics, freight tariffs, compilation of national accounts, and economic research and analysis. In the present times, given the widespread adoption of the Harmonised System by over 200 countries, it would be extremely difficult to deal with an international trade issue involving commodities, without adverting to the Harmonised System. The Code is the bedrock of custom controls and procedures. The HSN consists of over 5000 commodities groups, which are structured into 21 Sections and 97 Chapters, which are further divided into four and six digit subheadings. Many custom administrations, like India, use an eight or more digit commodity coding system, with the first six digits being the HSN code.

10. Classification under the Harmonised System is done by placing the good under the most apt and fitting sub-heading. This

Page 16 of 28 is done by choosing the appropriate Chapter, Heading, and sub-heading respectively. To facilitate interpretation and classification, each of the 97 Chapters in the HSN contain corresponding Chapter Notes, General Notes, and Explanatory Notes applicable to the Headings and sub-headings within that Chapter. In addition, there are six General Rules of 10 Interpretation applicable to the Harmonised System as a whole.

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12. We would, at this stage, take on

record the well-settled principle that words in a taxing statute must be construed in consonance with their commonly accepted meaning in the trade and their popular meaning. When a word is not explicitly defined, or there is ambiguity as to its meaning, it must be interpreted for the purpose of classification in the popular sense, which is the sense attributed to it by those people who are conversant with the subject matter that the statute is dealing with. This principle should commend to the authorities as it is a good fiscal policy not to put people in doubt or quandary about their tax liability. The common parlance test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law-maker. However, the above rule is subject to certain exceptions, for

Page 17 of 28 example, when there is an artificial definition or special meaning attached to the word in a statute, then the ordinary sense approach would not be applicable.”

8. Guided by the definition of heat pump as given in

the HSN, it is clearly discernible that the Modified

Vapour Absorption Chillers (MVAC) manufactured by the

appellant do not satisfy the definition of heat pump as

given in the HSN. According to the appellant, the

functioning of the MVAC involved - a) Lithium Bromide

in a lower concentration is made to react with water to

form what is commonly known as the ‘weak solution’

containing both water and Lithium Bromide; b) To this

weak solution, heat is applied. When heat is applied,

the concentration of Lithium Bromide increase which

results in the separation of the water from Lithium

Bromide. The separated water is in the form of Vapour;

c) This Vapour travels to the condenser and then to the

cooling tower to produce chilled water; d) The waste

heat if any can be used to produce hot water. The heat

can also be wasted.

9. The heat pumps by utilizing energy, as per HSN

becomes a source of more intense heat. However, since

Page 18 of 28 the final output of MVAC is cold/chilled water, the

MVAC obviously does not fit into the given definition.

The hot water, that is produced for generating chilled

condition/ refrigeration, is only an incidental purpose

of the MVAC and therefore classification of the

appellant’s product as a heat pump on this basis, would

in our view, be irrational.

10. Moreover, it cannot also be overlooked that

customers do not purchase MVAC because it produces hot

water and in commercial parlance the manufactured

product of the appellant is known as a Vapour

Absorption Chiller used for air conditioning and

refrigeration and not at all for heating purpose.

11. The appellant however argued that their machine can

produce both chilled and hot water as output using

refrigeration cycle and the product user has the option

of availing either hot or chilled water. On this

aspect, it is acknowledged by the learned counsel for

the appellant that the production of cold water never

stops when the MVAC is operating. Of course, with the

option of a switch, the hot water can also be obtained.

Page 19 of 28 However, the customer does not have the option of

choosing either hot or chilled water and he has to

compulsorily use chilled water or use both chilled

water and hot water.

12. As it is not possible for the user to obtain only

hot water from the MVAC, we find it difficult to relate

the product to the definition of heat pump given in the

HSN. The manner of operation of the device and its

output makes it abundantly clear that the primary

purpose of the MVAC is to produce chilled water and the

incidental production of hot water in its operation is

only incidental and cannot therefore be a ground for

classification of the product under Chapter 8418.

13. When the market/common parlance test is applied for

the manufactured product, it is seen that the appellant

in their website have identified Vapour Absorption

Chillers and heat pumps separately. Significantly in

the description of the product on the appellant’s

website, Vapour Absorption Chillers do not mention

about its heating capability. Likewise, heat pumps do

not mention about the cooling function. This would

Page 20 of 28 suggest that the appellants do not themselves recognize

the incidental hot water generating capacity of the

Vapour Absorption Chillers, to treat it as a heat pump.

The modification of Vapour Absorption Chillers by

adding a sensor to gauze the temperature and

incorporating a selector switch in the control panel to

select heating/cooling mode with added wiring to carry

the signal from the censors would simply mean that a

vapour absorption chiller can also produce hot water.

However, what is important to keep in mind is that the

additional purpose does not alter the primary

character/functionality of the product which is to

function as a vapour absorption chiller, used to

produce chilled water for the purpose of refrigeration

and air conditioning. This is how the product is

recognized in the market. The incidental output from

the machine cannot therefore justify classification of

the product in the category of heat pump.

14. Insofar as the submission of Mr. V. Sridharan, the

learned Senior Counsel that the product manufactured by

the appellant must be similarly classified as the

products manufactured by the two rival companies i.e.

Page 21 of 28 M/s. Blue Star and M/s. Voltas, as was decided in the

related proceedings, it must be said at the outset that

the concerned decisions of the Tribunal related to

classification of the product under two rival entries

but in the present case, the adjudication relates to a

single entry. Additionally, in the present matter, the

Tribunal held in favour of the Revenue whereas in the

case of Blue Star (supra) and Voltas (supra), the

manufacturers succeeded with their contention before

the Tribunal. Therefore, the decision cited by the

learned senior counsel for the appellant do not

persuade us to hold in favour of the appellant.

15. That apart, it must be kept in mind that the

Revenue in the case of Voltas (supra), classified their

Vapour Absorption Unit as an air conditioning equipment

falling under Chapter 8415 and not as a refrigeration

equipment falling under Chapter 8418. Significantly,

while declaring that the product is a refrigeration

equipment falling under Chapter 8418, the Tribunal had

no occasion to decide whether the product is a heat

pump or not. Therefore, in the present matter where

the issue to be decided is whether MVAC is a heat pump

Page 22 of 28 or not, the decision in the case of Voltas (supra) can

be of no assistance for such determination.

16. Likewise, in the case of Blue Star, in order to

classify the product beyond the scope of heat pump, the

Revenue placed it under Chapter 8415. In that

proceeding, the product in question was not tested to

determine whether it would be covered in the definition

of heat pump given in the HSN. The onus to be

discharged by M/s. Blue Star, in their case, was to

prove that their product did not fall under Chapter

8415 and they had no occasion to satisfy the definition

under HSN, for their product. Moreover, as earlier

said, unlike the case of M/s. Blue Star, we are not

required to deal with two rival entries in the present

matter as the contention of the Revenue before us is

that despite the product falling under Chapter 8418,

the MVAC is not a heat pump.

17. Proceeding next to examine whether Chapter Note 7

to Chapter 84 can have a bearing in the present matter,

what is stated therein is that a machine is capable of

additional function, for the purpose of classification,

Page 23 of 28 its principal purpose is to be understood as the

machine’s sole purpose. On this, the learned counsel

for the Revenue has argued that Chapter note 7 forms

part of the HSN which has been adopted in the Central

Excise Tariff Act and the same being an Act of

Parliament, the reliance on the chapter note in the HSN

is a legal contention which, given the circumstances,

can be applied in the present matter. We cannot also

be unmindful of the fact that Chapter Note 7 comes into

play only when there are two or more headings, and in

those situations when, none of those headings fall

under Chapter 84.01 to 84.24. According to HSN, the

headings 84.01 to 84.24 cover an apparatus by referring

to their definition which can be used in different

industries. The present case pertains to heading 84.18

and the expression and phrases must therefore be

literally construed to include two commercial

classifications within the same heading. For example, a

product under heading 84.18 can either be a

refrigerator or a freezer or a refrigeration equipment

or a heat pump not falling under Chapter 8415. In a

situation like this, if we apply Chapter Note 7, the

Page 24 of 28 same can act as a tie-breaker mechanism. The

resolution can be achieved by looking at the Principal

Purpose Test, which if applied, can also resolve the

intra-heading dispute. Such mode of interpretation in

our understanding will aid in settling, the

classification dispute by adhering to the HSN Code.

18. If the Principal Purpose Test is applied for the

machine manufactured by the appellant, it is quite

apparent that the product MVAC is intended to produce

chilled water. Moreover, even if the option of availing

hot water is available, significantly, the production

of chilled water never ceases, while the machine is

operating. Therefore, the principal purpose of the

machine is undoubtedly to produce chilled water.

Therefore, taking help from Chapter Note 7, producing

chilled water is to be taken as the sole purpose of the

Modified Vapour Absorption Chillers manufactured by the

appellants. The CESTAT by applying the ratio laid down

in Commissioner of Central Excise, Delhi Vs. Carrier

Aircon Ltd.5 has therefore concluded that the function

5 (2006) 5 SCC 596

Page 25 of 28 of the machine is only to chill water or bring it to a

very low temperature.

19. The above conclusion is supported by the ratio in

Xerox India Ltd. Vs. Commissioner of Customs 6, where

Justice H.L. Dattu while adverting to functional

classification of multi-functional machines opined that

in case of machines capable of performing two or more

supplementary/alternative functions, the appropriate

classification should be in reference to its principal

function.

20. The principles enunciated in DL Steels (Supra) qua

significance of HSN and the manner in which the

appellant’s product have been treated on the earlier

occasions by the Revenue, together with the fact that

it had been treated as a chiller and the customers have

been purchasing MVAC primarily for the purpose of

chilling, should have a definite bearing on the

classification issue under consideration. The MVAC

manufactured by the Appellant should normally be not

classified as a heat pump, notwithstanding the fact

that the manufacturer has modified the vapour

6 (2010) 14 SCC 430

Page 26 of 28 absorption chiller, using additional components.

Moreover, the definition provided in the HSN must have

an overriding influence over any other definition for

the purpose of Classification of the product.

21. The end use of MVAC is to produce Chilled Water.

The use of heat as one of the sources in the air-

conditioning system would not take away the primary or

basic function of the MVAC, which is to cool and not

heat water. The additional heating capability of the

machine thus raises a peculiar dilemma, but then one

can be guided by the market parlance test which shows

that the machine is perceived and purchased only as a

cooling device. The circumstances here remind us of the

somewhat similar predicament of Lord Illingworth, the

character in A Women of No Importance. In this classic

play of Oscar Wilde7, in the context of observing all

kinds of human capabilities, the dramatis personae made

that classic remark on those, “who do the improbable.”

The uncharacteristic capability of the cooling machine

to also produce hot water, should not however deflect

us and it would be appropriate to observe in this case

7 Oscar Wilde - A Women of No Importance.: Act 3.

Page 27 of 28 that a chiller machine is attempting to masquerade as a

heat pump, to gain concessional tariff benefits. The

conclusion therefore is inevitable that the MVAC

machine must not be categorized as a Heat Pump.

Consequently, it is declared that the product

manufactured by the appellants merit classification

under Sub-heading 8418.10 of the central excise Tariff

Act, 1985, in the category of refrigerating equipment.

The view of the CESTAT is thus affirmed. The appeals

are accordingly dismissed leaving the parties to bear

their own cost.

………………………………………………………J. [K.M. JOSEPH]

………………………………………………………J. [HRISHIKESH ROY] NEW DELHI OCTOBER 13, 2022

Page 28 of 28