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CASE NO.: Appeal (civil)  8066-8068 of 2001

PETITIONER: Fedders Lloyd Corportion Ltd

RESPONDENT: Commissioner of Central Excise, Mumbai

DATE OF JUDGMENT: 03/12/2007

BENCH: ASHOK BHAN & V.S. SIRPURKAR

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO(S). 8066-8068 of 2001

BHAN, J.

1.      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.

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

3.      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.

4.      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 air-conditioners.  

5.      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.

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6.      Counsels for the parties have been heard at length.

7.      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 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 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 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.

8.      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.   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

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into existence at Kanjumarg Workshop of the appellant.   

9.      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.

10.     Section 2(f) of the Central Excise Act defines  "manufacutre" as: "(f) "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 (5 of 1986) as amounting to  manufacture"

11.     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 case.   As 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.      12.     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.   

13.     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

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and the invoice raised by the appellant.    

14.     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 notice.  

15.     The appeals are dismissed, accordingly, with no order  as to costs.