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CASE NO.: Appeal (civil)  1100-1101 of 2001

PETITIONER: Commissioner of Central Excise, Delhi

RESPONDENT: M/s Allied Air-Conditioning Corporation (Regd.)

DATE OF JUDGMENT: 13/09/2006

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

       These two appeals are directed against a common  judgment of the Central Excise and Gold Control Appellate  Tribunal, New Delhi, (in short the ’CEGAT’). Respondent  (hereinafter referred to as the ’assessee’) preferred the appeals  before the Tribunal against a common order dated 31.3.1997  passed by Commissioner of Central Excise, New Delhi (in short  the ’Commissioner’). The issues involved in the appeals were  (a) the valuation of "packaged type Air Conditioner" and (b)  whether the extended period of limitation is invokable in  demanding duty.  The basic facts in a nutshell are as follows:

       The respondent is engaged inter alia in the manufacture  of, inter alia, package type Air Conditioners falling under Tariff  Item No. 29-A of the erstwhile Tariff and Chapter heading  No.84.15 of the Central Excise Tariff Act, 1985 (in short the  ’Tariff Act’).  According to the appellant, the respondent was  selling the air conditioners by assembling the same at site  through orders procured from various authorities by way of  Tenders/Contracts. The Contracts /Tenders entered into by  the assessee are broadly divided into nine components:

1.      Compressors 2.      Accessories 3.      Pumps 4.      Cooling Towers 5.      Humidification & heating etc. 6.      Ducting material 7.      Plumbing material 8.      Civil Work 9.      Electrical material

Undisputedly, the respondent was filing its price list in  respect of compressors and assessories i.e. Item Nos.1 & 2 as  noted above. Premises of the respondent, where activities were  being carried on, was visited by Central Excise Officers on  7.3.1987.  Certain records were examined.  Concerned officers  were of the view that there was evasion of duty by mis- declaration. Respondent had cleared the air conditioners  without payment of duty by taking the plea that packaged type  air conditioners were being cleared in a knocked down  condition and were assembled directly at site and were not

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therefore assessable as air conditioners.  Show cause notice  was issued on 12.10.1988 for assessment years 1984-85,  1985-86 & 1986-87 (part period).

       On 28.3.1989 the officials again visited the premises and  found that the respondent was continuing to clear the goods  and was not correctly working out the duty payable.  The  second show cause notice was issued for the period covering  assessment year 1986-87 (residual part), 1987-88 and 1988- 89.  The extended period under proviso to Section 11(A) of the  Central Excise Act, 1944 (in short the ’Act’) was invoked.  After  considering these submissions made by the respondent, these  two show cause notices were adjudicated and duty demand of  Rs.12,20,936/-  was confirmed and penalty of Rs. 1,00,000/-  was imposed in respect of first show cause notice.  For the  subsequent show cause notice a duty demand of   Rs.2,79,169/- was confirmed and penalty of Rs.30,000/- was  imposed.  Respondent preferred appeals before CEGAT. By a  common order, CEGAT remanded the matter to the  Commissioner for fresh consideration with regard to valuation,  rate of duty and limitation. On fresh adjudication on  31.3.1997 Commissioner noted that the respondent had  wrongly filed the price list in Part I on the issue of valuation.   Out of nine items, in respect of two items there was no  dispute.  Commissioner excluded the valuation of the civil  work from the assessable value.  Demand of Rs.9,34,179/-for  the consolidated period was confirmed and penalty of  Rs.2,00,000/- was imposed under Rules 9(2), 173 Q and 226  of the Central Excise Rules, 1944 (in short the ’Rules’).  The  order was challenged by the respondent before the CEGAT.   Without discussing in respect of the individual items, the  Tribunal allowed respondent’s appeal relying on a decision of  this Court in PSI Data System Ltd. v. CCE [1997(89) ELT 3  SC)].  It however, held that the extended period of limitation  was to be applied.  It was noted that in respect of the first  show cause notice dated 12.10.1988 that since the copies of  the contract were not furnished along with price list which  were filed in Form I and not in Form II which is meant for the  contract prices,  Department was not aware of the existence of  the contract.  In respect of second show cause notice, it was  held that the respondent had not refuted the finding of the  Commissioner to the effect that goods were cleared without the  cover of the excise document and without entering them in the  Statutory records. Therefore, it was held that the extended  period of limitation was available. But since it held that  because of disputed items were not to be included,  adjudicating authority has to work out the assessable value  with a view to determine whether any duty is to be demanded  from the respondent.  If any duty was to be demanded, the  amount of penalty was to be worked out at the discretion of  the Collector to be imposed.

In support of the appeals, Mr. A.K. Ganguli, learned Sr.  counsel submitted that PSI’s case (supra) was not applicable  to the facts of the present case. CEGAT even did not analyse  the factual position and there was no discussion as to why the  articles covered under various items were not to be reckoned  to work out the assessable value.  It has also not been decided  as to which of the items can be termed as "assessories" and  which can be termed as "components".

Learned counsel for the respondent on the other hand  submitted that the CEGAT had taken into account the broad  features and had rightly decided that the valuation of the  items in question were to be excluded. It was further

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submitted that the CEGAT’s view about limitation is not  correct.  In Black’s Law Dictionary (5th Edn. p. 13) ’accessory’ has  been defined as anything which is joined to another thing as  an ornament, or to render it more perfect, or which  accompanies it, or is connected with it as an incident, or as  subordinate to it, or which belongs to or with it, adjunct or  accompaniment, a thing of subordinate importance. Aiding or  contributing in secondary way of assisting in or contributing  to as a subordinate is the essence on the basis of which it can  be decided whether an article is an accessory or not. Whether  an article or part is an accessory cannot be decided with  reference to its necessity to its effective use of the goods to w  which it is joined as a whole. General adaptability may be  relevant but may not by itself be conclusive. Take for instance  stereo or air-conditioner designed and manufactured for  fitment in a motorcar. It would not be absolutely necessary or  generally adapted. But when they are fitted to the vehicle,  undoubtedly it would add comfort or enjoyment in the use of  the vehicle. Another test may be whether a particular article or  articles or parts, can be said to be available for sale in an  automobile market or shops or places of manufacture; if the  dealer says it to be available certainly such an article or part  would be manufactured or kept for sale only as an accessory  for the use in the motor vehicle, Of course, this may not also  be a conclusive test but it is given by only way of illustration.  It may be noted that some of the parts, in the case of a motor  car like axle, steering, tyres, battery etc. are absolutely  necessary accessories for the effective use of the motor vehicle.  (See Mehra Brothers v. Joint Commercial Officer Madras  (1991) 1 SCC 514).

In the absence of any definition of the term "component  parts" it is permissible to refer to the dictionary meaning of the  word "component".  According to the Webster Comprehensive  Dictionary, International Edition the word ’component" inter  alia means a constituent part. (See Star Paper Mills Ltd. v.  Collector of Central Excise (1989) 4 SCC 724).  

By way of example, a spare part is a replacement part to  replace a damaged or worn-out component but it is,  nevertheless, a component part. In such cases, "Component"  was the genus and ’spare’ was a species thereof; it was a  component which was used for replacement. (See Hindustan  Sanitaryware & Industries Ltd. & Lakshmi Cement v. Collector  of Customs, Calcutta (2000) 10 SCC 224).

A bare reading of the CEGAT’s order makes the position  clear that it has not analysed each item individually.  It has  also not indicated how the ratio in PSI’s case (supra) has any  relevance.  The same was rendered in entirely different factual  scenario. A judgment should be understood in the light of  facts of the case and no more should be read into it than what  it actually says. It is neither desirable nor permissible to pick  out a word or a sentence from the judgment divorced from the  context of the question under consideration and treat it to be  complete law decided by this Court. The judgment must be  read as a whole and the observations from the judgment have  to be considered in the light of the questions which were  before this Court. (See Mehboob Dawood Shaikh v. State of  Maharashtra (2004 (2) SCC 362).  CEGAT has also been not  analysed the respective stand of the appellant and the  respondent on the issue of limitation elaborately. Various  documents were pressed into service by the parties in support  of their respective stand. The relevance of these documents

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has not been examined in detail by CEGAT.  

In the aforesaid circumstances we deem it proper to remit  the matter to CEGAT to consider the stand of the revenue as  regards the disputed items and deal with the items  individually and also examine the rival stand on the question  of limitation.  Let the exercise be done at the earliest as the  matter is pending since long.   

Appeals are accordingly disposed of with no orders as to  costs.