PETITIONER:
FRICK INDIA LTD.
Vs.
RESPONDENT:
UNION OF INDIA AND OTHERS
DATE OF JUDGMENT21/12/1989
BENCH:
RAMASWAMI, V. (J) II
BENCH:
RAMASWAMI, V. (J) II
RANGNATHAN, S.
KULDIP SINGH (J)
CITATION:
1990 AIR 689 1989 SCR Supl. (2) 570
1990 SCC (1) 400 JT 1989 Supl. 432
1989 SCALE (2)1417
ACT:
Central Excise Tariff Act–Item No. 29-A–Air Condition-
ing and refrigeration equipment–Levy of excise duty under
Clause (3) of Item 29A.
HEADNOTE:
The appellant-company was engaged in the manufacturing
of airconditioning and refrigeration equipment under a
proper licence. On January 21, 1970 the appellant cleared
from the factory cooling coils, condensers and compressors
and supplied the same to M/s. Ravi Cold Storage, Ahmedabad
for putting up a cold storage and paid duty of Rs.13,547.20
P in respect thereof. Again on January 21, 1969, the appel-
lant cleared from the factory various parts of refrigerating
and air-conditioning appliances and machinery for an Ice
factory plant to one M/s. Gujarat Industrial Investment
Corporation Ltd., Ahmedabad and paid a duty of Rs.
19,336.87P. Both the aforesaid goods were manufactured at
the appellant’s factory. Thereafter the appellant filed two
refund applications of the said excise duty before the
Assistant Collector of Customs, contending that the refrig-
erating and air-conditioning appliances which they had
removed on the aforesaid dates were not excisable goods
failing under Tariff Item No. 29A(3). The Assistant Collec-
tor of Customs rejected both the applications holding that
the assessment was correctly made. The appellant-company
preferred two appeals against these orders before the Col-
lector of Customs and Central Excise, Chandigarh, who dis-
missed both the appeals. Thereupon the appellant filed a
writ petition in the High Court. The learned single Judge
who heard the petition dismissed the same holding that the
goods supplied are parts of a refrigerating and air-condi-
tioning appliances, that a complete cold storage plant was
not supplied to M/s. Ravi Cold Storage, Ahmedabad or M/s.
Gujarat Industrial Investment Corporation Ltd., Ahmedabad
and that they would fail clearly within the purview of
Tariff sub-item (3) of Tariff Item 29-A. An appeal preferred
against this judgment was dismissed by a Division Bench in
limine. Hence this appeal.
Before this Court also the appellant inter alia contended
that
571
though in its sweep sub-item (3) may appear to cover all and
every part of refrigerating and air-conditioning appliances
and machinery of all sorts, the words “and parts thereof” in
the heading controlled the meaning and restrict it in the
context only to parts of a completed unit which as such
completed unit would have come under sub-items (1) and (2)
of item 29-A.
Dismissing the appeal, this Court,
HELD: The legislative history and the notifications of
the Government show that sub-item (3) of item 29-A is a
comprehensive provision encompassing within it all sorts of
air-conditioning and refrigerating appliances and machinery
and the Government of India was issuing notifications of
exemptions on the understanding that such parts are covered
by sub-item (3). The language used in sub-item (3) is also
wide and comprehensive in its application and could not be
given a restricted meaning. Sub-items (1), (2) and (3) are
independent of each other and mutually exclusive. The scope
of sub-item (3) is neither restricted nor controlled by the
provisions of sub-items (1) and (2). [576C-D]
Whether the manufacturer supplies the refrigerating or
airconditioning appliances as a complete unit or not is not
relevant for the levy of duty on the parts specified in
sub-item (3) of item 29-A. [576F-G]
Complete plants which are covered by items (1) and (2)
cannot be considered as parts of machinery and such complete
plants would not be classifiable under sub-item (3) of Item
29-A. [580B-C]
Mother India Refrigeration Industries Pvt. Ltd. v.
Supdt. of Central Excise and Ors., [1980] ELT 600 All,
overruled.
Blue Star Ltd. v. Union of India and Anr., [1980] ELT
280 Bom.; Joy Ice Cream, Bombay v. Union of India, [1989] 39
ELT 521 Bom.; Calicut Refrigeration Co. v. Collector of
Customs & Central Excise, Cochin and Ors., [1982] ELT 106
Ker.; Chhibramau Cold Storage v. CEGAT, [1989] ELT 161-AII;
Goptal Cold Storage & Ice Factory v. Union of India and
Ors., [1985] ELT 692-All and Anil Ice Factory & Anr. v.
Union of India and Ors., [1984] ELT 333-Gujarat, referred
to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3395 of
1982.
From the Judgment and Order dated 4.6.1982 of the Punjab and
572
Haryana High Court in L.P.A. No. 936 of 1982
Shankar Das and H.K. Puri for the Appellant.
A.K. Ganguli, R.P. Srivastava, P. Parameshwaran, Ms. A.
Subhashini and Dalip Sinha for the Respondents.
The Judgment of the Court was delivered by
V. RAMASWAMI, J. The appellants are a public limited
company having a factory at Faridabad and engaged in manu-
facturing air-conditioning and refrigeration equipment of
various kinds and descriptions. They are holding a L-4
Licence to manufacture goods falling under Tariff Item No.
29A of the Central Excise Tariff. As per classification
lists submitted from time to time under rule 173B of the
Central Excise Rules, 1944, the company had declared in Form
I that they are engaged in the manufacture of goods falling
under sub-items (2) and (3) of Tariff Item No. 29A. Against
gate pass Nos. 111, 112 and 113 dated January 21, 1970 and
gate pass No. 116 dated January 22, 1970 the appellants had
cleared from the factory cooling coils, condensors and
compressors and supplied the same for putting up a cold
storage plant to one M/s Ravi Cold Storage, Ahmedabad. These
parts were manufactured by the appellants in their factory
at Faridabad and were cleared by them against the above-
mentioned gate passes after payment of a duty of Rs.
13.547.20 P. Against gate pass Nos. 95, 90, 97 and 98 dated
January 21, 1969 the appellants had cleared from the factory
various parts of refrigerating and air-conditioning appli-
ances and machinery for an Ice-factory plant to one M/s
Gujarat Industrial Investment Corporation Limited, Ahmeda-
bad. These parts also were manufactured by the appellants in
their factory at Faridabad and were cleared by them against
gate passes referred to above after payment of a duty of Rs.
19,336.87 P.
On the ground that parts of the refrigerating and air-
conditioning appliances which they have removed under the
above said gate passes are not excisable goods falling under
Tariff Item No. 29A(3), they filed two refund applications.
The Assistant Collector of Customs rejected both these
applications holding that the assessment was made correctly.
The appellants preferred two appeals agianst these orders
before the Collector of Customs and Central Excise, Chandi-
garh, who by his common order dated December 20, 1971 dis-
missed the appeals. Thereafter, the appellants filed writ
petition in the High Court of Punjab and Haryana at Chandi-
garh. This writ petition was
573
dismissed by a learned Single Judge holding that the goods
supplied are parts of a refrigerating and air-conditioning
appliances, that a complete cold storage plant was not
supplied to M/s Ravi Cold Storage, Ahmedabad or M/s Gujarat
Industrial Investment Corporation Ltd. Ahmedabad, and that
they will fall clearly within the purview of Tariff sub-item
(3) of Tariff Item 29-A. An appeal preferred against this
judgment was dismissed in limine by a Division Bench.
In order to understand the argument of the learned
counsel for the appellants, it is necessary to set out
Tariff Item 29-A in full at the relevant period, which reads
as follows:
Item No. Tariff Description Rate of Duty
29A.
REFRIGERATING AND AIR-CONDITIONING
APPLIANCES AND MACHINERY, ALL SORTS, AND PARTS THEREOF–
(1) Refrigerators and other refrigerat- Thirty
ing appliances, which are ordinarily per cent
sold or offered for sale as ready ad valorem
assembled units, such as ice markers,
bottle collers, display cabinets
and water coolers.
(2) Air-conditioners and other air- Thirty
conditioning appliances, which per cent
are ordinarily sold or offered ad valorem
for sale as ready assembled
units, including package type
of air-conditioners and
evaporative type of coolers.
(3) Parts of refrigerating and Forty
air-conditioning appliances per cent
and machinery, all sorts. ad valorem
The argument of the learned counsel for the appellants
was that sub-items (1) and (2) deal with refrigerators and
other refrigerating appliances and air-conditioners and
other air-conditioning appliances respectively which are
ordinarily sold or offered for sale as a ready
4514
assembled unit. Therefore, in order to bring it within sub-
items (1) and (2) such refrigerating and air-conditioning
appliances should be complete assembled units and they must
also be ordinarily sold or offered for sale as such ready
assembled units. The illustrative examples referred to in
the two sub-items make this clear according to them. The
cold storage plant and ice-factory plant supplied to the
factories concerned in this case as such are not such com-
plete assembled units which are ordinarily sold or offered
for sale within the meaning of sub-items (1) and (2). From
this premise they sought to interpret sub-item (3) as mean-
ing that the goods that are covered by that sub-item are
parts of those refrigerating or air-conditioning appliances
which in its assembled form would have come as a complete
unit under Tariff sub-items (1) and (2) of Item 29A and are
manufactured for sale. In other words, they want to restrict
the content of sub-item (3) with reference to the items that
may fall under sub-items (1) and (2). The further submission
was that though in its sweep sub-item (3) may appear to
cover all and every part of refrigerating and air-condition-
ing appliances and machinery of all sorts, the words ”and
parts therefore” in the heading controlled the meaning and
restrict it in the context only to parts of a completed unit
which as such completed unit would have come under sub-items
(1) and (2) of Item 29A. In this connection, learned counsel
has referred to certain decisions of the High Courts which
we will refer to later.
By Finance Act of 1961 Item 29A and 40 were introduced
in the First Schedule to the Central Excises and Salt Act,
1944 and those two entries read as follows:
“29A. AIR CONDITIONING MACHI- Twenty
NERY, ALL SORTS. per cent
ad valorem.
40. REFRIGERATORS AND PARTS Twenty
THEREOF. SUCH AS ARE per cent
SPECIALLY DESIGNED FOR USE ad valorem.”
WITH REFRIGERATORS.
The Notes on Clauses relating to the relevant clause in the
Finance Bill 10 of 1961 stated that Item 29A proposes to
levy an excise duty on air-conditioning machinery and Item
40 proposes to levy an excise duty on refrigerators and
“parts thereof.”
By the Finance Act 2 of 1962 a combined tariff entry in the
form
575
prevailing in 1969 and 1970 was introduced and the Notes on
Clauses relating to this amendment stated that the proposal
is “to combine into one item the present tariff items 29A
and 40 relating to ‘Air-conditioning Machinery’ and ‘Refrig-
erators’ respectively as well as to make it more comprehen-
sive.” Under the Government of India, Ministry of Finance,
Department of Revenue, Notification No. 80/62-Central Ex-
cises, dated 24th April, 1962 as subsequently amended by
Notifications dated 29th December, 1962, 23rd March, 1968
and 14th June, 1969 all parts of refrigerating and air-
conditioning appliances and machinery other than the “parts”
mentioned below were exempt from the payment of excise duty
leviable thereon:
“(i) Cooling coils or evaporator
(ii) Compressor
(iii) Condenser
(iv) Thermostat
(v) Cooling unit, and in the case of absorption types
of refrigerators in which there is no compressor, heater
including Burners and Baffles in a Kerosene Operated absorp-
tion type refrigerator.
(vi) Starting Relay, controls (including expansion
value and solenoid valves) and pressure switches
(vii) Overload Protection/Thermal Relay
(viii) Cabinet.”
There are a number of other notifications also exempting
parts of refrigerating and air-conditioning appliances and
machinery, intended to be used for various purposes speci-
fied in the notifications, such as, use in refrigerating and
air-conditioning appliances or machinery which are installed
or to be installed in any of the following establishments:
“1. Computer rooms. 2. Research and test laboratories 3.
Animal houses 4. Telephone exchanges 5. Broadcasting
studios 6. Trawlers 7. Dams 8. Mines and tunnels 9.
Thermal and hydel power stations 10.
576
Technical buildings of Military Engineering Service 11. Any
Hospital run by the Central Government, a State Govt., a
Local Authority or a Public Charitable Institution and 12.
Any factory.”
Vide the Notification No. 93/76-CE dated 16.3.1976 issued
under subitem (3) of Item 29A of the First Schedule. there
are various other notifications also issued under the same
sub-item which covers installation of air-condition and
refrigerating equipments of almost all categories.
The legislative history and the notifications of the
Government show that sub-item (3) of Item 20A is a compre-
hensive provision encompassing within it parts of all sons
of air-conditioning and refrigerating appliances and machin-
ery and the Government of India was issuing notifications of
exemptions on the understanding that such parts are covered
by sub-item (3). The language used in sub-item (3) is also
wide and comprehensive in its application and could not be
given a restricted meaning. Sub-items (1), (2) and (3) are
independent of each other and mutually exclusive. The scope
of sub-item (3) is neither restricted nor controlled by the
provisions of sub-items (1) and (2).
It is well-settled that the headings prefixed to sec-
tions or entries cannot control the plain words of the
provision; they cannot also be referred to for the purpose
of construing the provision when the words used in the
provision are clear and unambiguous; nor can they be used
for cutting down the plain meaning of the words in the
provision. Only, in the case of ambiguity or doubt the
heading or sub-heading may be referred to as an aid in
construing the provision but even in such a case it could
not be used for cutting down the wide application of the
clear words used in the provision. Sub-item (3) so construed
is wide in its application and all parts of refrigerating
and air-conditioning appliances and machines whether they
are covered or not covered under sub-items (1) and (2) would
be clearly covered under that sub-item. Therefore, whether
the manufacturer supplied the refrigerating or air-condi-
tioning appliances as a complete unit or not is not relevant
for the levy of duty on the parts specified in sub-item (3)
of Item 29A.
Strong reliance was placed by the learned counsel for
appellants on the decision of the Allahabad High Court in
Mother India Refrigeration Industries (P) Ltd. v. Superin-
tendent of Central Excise & Ors., [1980] ELT 600 All. In
that case the writ petitioners were the owners
577
Of a old storage plant. The writ petitioners themselves
installed and assembled the cold storage plant. Part of the
plant consisted of erecting locally what are called cooling
coils and condensers. Generally cooling coils and condensers
contain a very long length of pipes made in a particular
shape. The petitioners in that case, however, bought pipes
of various lengths, erected them one after the other and
joined one with the other with a ‘U’ shape bend. These bends
were welded. The result was that the various pipes consti-
tuted an unit indesigning the plant. This part of the plant
was necessary in order to pass the cooling gas through it
and thereby cool the chambers of the storage. The petition-
ers bought the pipes and the bends from the market and got
them placed at the factory site and got them welded. The
department, in the view that the conglomeration of pipes
manufactured by the petitioner, constituted manufacture of
cooling coils which are parts of refrigerating and air-
conditioning appliances and machinery covered by Item 29A(3)
called upon the petitioners to pay excise duty on its value.
All the authorities found that the erection and installation
by the petitioners, by laying pipes and joining them by
welded bends, amounted to the manufacture of cooling coils
and condensers as known to refrigeration technology. The
High Court accepted these findings. However, it held that
parts of refrigerating and air-conditioning appliances which
answer the description given in sub-items (1) and (2) alone
are liable to duty under Entry 29A(3) and not all parts used
in refrigeration technology. The learned judges reached this
conclusion on the grounds that:
“The heading of Entry 29A makes it clear that only parts of
such refrigerating and air-conditioning appliances and
machinery as are covered by sub-entries (1) and (2) alone
are liable to duty. In other words, the parts in question
should be such as are ordinarily sold or offered for sale as
ready. assembled units. On any other interpretation the
words ‘thereof’ occurring in the heading 29A will be redun-
dant. An interpretation which makes any part of a statute
redundant has to be discarded.”
and that
“When an entry in the schedule specifically refers to and re-
stricts the applicability of duty to goods which are assembled
units and which are generally offered for sale, the concept of
sale is necessarily brought in. As already seen, sub-entry (3)
takes it colour from sub-entries (1) and (2) because of the
specific directive of the heading by using the words ‘parts
thereof’.”
578
We are afraid that both these reasons are fallacious and not
acceptable. As already stated neither can sub-entry (3) be
said to take its colour from sub-entries (1) and (2) nor
could those sub-entries or heading curtail the plain meaning
of the words used in sub-entry (3). We, therefore, hold that
the Mother India Refrigeration Industries (P) Ltd. v. Supdt.
of Central Excise & Ors. ‘s, case (supra), was wrongly
decided and accordingly we overrule the same. The learned
Judges have also relied on a Tariff Advice dated September
30, 1969 given under the Customs Act for the purpose of
levying countervailing duty. We shall deal with this ques-
tion when we consider that Tariff Advice in a latter part of
this judgment.
The decisions of the Bombay High Court in Blue Star Ltd.
v. Union of India & Anr., [1980] ELT 280 Bom. and Joy Ice
Cream, Bombay v. Union of India, [1989] 39 ELT 521 Bom.,
related to the scope of Tariff item 29A(1) and not Item
29A(3) with which we are concerned. In the view we have
taken that sub-entries (1) and (2) of Entry 29A cannot
control or restrict the meaning of such entry (3) it is not
necessary for us to go into the scope of Entry 29A (1) and
(2). These decisions, therefore, are no relevance.
The decision of the Kerala High Court in Calicut Refrig-
eration Co. v. Collector of Customs & Central Excise, Cochin
& Ors., [1982] ELT 106 Ker., also does not touch upon the
question with which we are concerned. The decision of the
Allahabad High Court in Chhibramau Cold Storage v. CEGAT,
[1989] ELT 161 All. and Goptal Cold Storage & Ice Factory v.
Union of India & Ors., [1985] ELT 692 All., simply followed
the decision in Mother India Refrigeration Industries (P)
Ltd. v. Supdt. of Central Excise & Ors., (supra) and, there-
fore, they do not advance the case any further.
On the other hand, we have a decision of the Gujarat
Court in Anil Ice Factory & Anr. v. Union of India & Ors.,
[1984] ELT 333 Guj., wherein M.P. Thakkar, Chief Justice, as
he then was, referred to the Allahabad High Court judgment
and dissenting from it held:
“On taking a close look at Item 29A it will be seen that
what is printed at the top of the entry as “caption” indi-
cates the nature of the goods covered by the entry. It does
not more than indicate what is the nature of the goods which
are specified in the said entry. Cls. (1), (2) and (3) are
independent of each other. Clause (3) in terms refers to
goods which fall within the description of the said entry,
579
namely, “Parts of refrigerating and air-conditioning appli-
ances and machinery, all sorts”. It is not disputed that
cooling coils and condensers would fall within the category
of “appliances and machinery”. Counsel however argues that
we must first read the scope of cl. (1) and cl. (2) and draw
an inference therefrom that the goods covered by entry, will
attract excise duty only provided they are manufactured for
sale. We see no valid reason for reading the entry in that
manner. Each of the three sub-clauses referes to different
entries and specifies different rates of duty for the goods
falling within the respective entries.”
and that
“As we indicated earlier, in the first place the purpose of
the caption is to provide a clue to the nature of the goods
which are covered by the entry. But even otherwise if the
caption is read in the manner in which it has been worded it
does not justify or warrant an inference that it related to
goods which are manufactured for the purpose of sale. Entry
29A adverts to goods which would fall within one or the
other of the three classifications specified therein. The
description of each category of goods if clearly mentioned
in col. (2). So far as CI. (3) is concerned the tariff
description is “parts of refrigerating and air-conditioning
appliances and machinery”. We cannot read the words
‘manufactured for sale’ in entry No. 3 by drawing upon the
theory of “Taking colour” which has no application in a case
like the present one. If we inject these words we would be
re-writing this section and we would be legislating which we
cannot do.”
The learned counsel for the appellants then relied on
the Trade Advice dated 30th September, 1969 given by the
Central Board of Excise and Customs, New Delhi, in respect
of classification of refrigerating machinery and ice making
plant which are not sold or offered for sale as ready assem-
bled unit for purposes of countervailing duty under the
Customs Act. After referring to sub-items (1) and (2) of
Item 29A as covering complete plant and equipment which a
re-ordinarily sold or offered for sale as ready assembled
units, had stated as follows, with reference to sub-item
(3):
“Sub-item (3) of item 29A of the Central Excise Tariff
580
refers to parts or’ machinery and appliances and complete
plants which cannot be considered as “parts of machinery”
would not be classifiable under sub-item (3) to item 29A
C.E.T. also.”
As may be seen from this paragraph it consists of two parts,
the first portion referring to parts of machinery and appli-
ances and the second portion referring to complete plants
which cannot be considered as parts of machinery. The whole
argument arose because of the composite sentence used in
this paragraph. It only means complete plants which are
covered by Items (1) and (2) cannot be considered as parts
on machinery and such complete plants would not be classi-
fiable under sub-item (3) of Item 29A. The reliance placed
by the learned counsel on this notification does not in any
way advance the case of the appellants.
In the foregoing circumstances, the appeal fails and it
is dismissed with costs.
Y. Lal Appeal
dismissed.
581