The main legal point established in the judgment is the importance of the definition of a product given in the HSN for the classification of goods for the purpose of levying excise duty. The court emphasized the significance of adhering to the HSN classification and the market/common parlance test in determining the classification of the product manufactured by the appellant.

JUDGMENT :

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 here is whether the product manufactured by the 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 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 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 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