By TIOL News Service

MUMBAI, DEC 02, 2014: THE appellant sought to classify Modified Vapour Absorption Chillers(MVAC) manufactured by them under CETH 8418 as heat pump other than air-conditioning machines and claimed the benefit of notification 155/86-CE and duty liability was discharged accordingly during 1991-92 and 92-93. The assessments were kept provisional.

A SCN was issued in March 1998 seeking to classify the product as part of air-conditioning and refrigeration machine [CETH 8418.90] and proposing to deny the benefit of concessional rate of 15% adv. claimed by the appellant and demanding duty @40% adv.

The Asstt. Commr. confirmed the classification as proposed and finalized the assessment by excluding the cost of lithium bromide and other accessories supplied along with MVAC.

Both, the assessee and the department challenged this order before the Commr (A).

The Commr. (A) allowed the assessees appeal and rejected the departmental appeal.

For the later period also, a similar development took place.

In the matter of the appeals filed by the department against both the orders of Commissioner(A), the Tribunal vide order dated 22.01.2009 held that the product in question is not a heat pump as claimed by the appellant and therefore, not eligible for the benefit of notification 155/86-CE. The Tribunal further held that the product is a complete machine in itself and not part of a machine. Since the demands were raised on the basis of rates applicable to parts of refrigeration machine, the Tribunal remanded the matter to re-calculate the duty as per the rates applicable to refrigeration machine and also to examine whether the price realized by the appellants was cum-duty price or not. As regards the inclusion of the cost of lithium bromide and other accessories, the Tribunal held that the cost of these items is not includible in the assessable value of the refrigeration machine.

Pursuant thereto, the Dy. Commissioner re-assessed the goods by treating the price received as cum-duty and classifying the products under CETH 8418.10 as air-conditioning/refrigeration machine. Inasmuch he confirmed a differential duty demand of Rs.5,30,86,840/-.

Incidentally, the order of the Tribunal is under challenge before the Supreme Court. However, no stay has been granted against the Tribunal's order.

Be that as it may, the differential duty confirmation was upheld by the Commissioner(A) and, therefore, the appellant is before the CESTAT.

Before proceeding with the appeal, the Bench asked the appellant whether it has any objection since the appeal passed by the Tribunal is under challenge before the Apex Court. Both the appellant and the Revenue not only did not raise any objection but also agreed that the appeal be considered by the Tribunal.

The appellant submitted -

++ The case of the department in the SCNs issued earlier and the order-in-original passed was that the product in question was part of air-conditioning and refrigeration machine and the differential demand was confirmed on this ground. Since the Tribunal has held that the product in question is not part but a complete machine in itself, the confirmation of duty demand now as per the directions of the Tribunal is not sustainable as it is at variance with the proposal in the show cause notice.

++ Reliance is placed on the decisions in Hindustan Polymers - 2002-TIOL-822-SC-CX, Warner Hindustan Ltd. - 2002-TIOL-480-SC-CX, Toyo Engineering Ltd. - 2006-TIOL-111-SC-CUS, Mafatlal Industries Ltd. - 2002-TIOL-54-SC-CX, Pathikonda Balasubba Setty {1967) 65 ITR 252 (Mys) & Hukumchand Mills Ltd. vs. CIT [(1967) 63 ITR 232 (SC)] to submit that Tribunal does not have the power to enhance the duty demand confirmed.

The AR submitted -

++ It is a settled law that a provisional assessment retains its provisional character for every purpose as held by the Madras High Court in Indian Oil Corporation, by the Tribunal in the case of Orient Pre-stressed Products (P) Ltd., Denso Haryana P. Ltd. - 2004-TIOL-613-CESTAT-DEL.

++ No show cause notice is required to be issued under section 11A for recovery of duty arising on finalization of assessment. ITC Ltd. - 2006-TIOL-141-SC-CX, Serai Kella Glass Works Pvt. Ltd. - 2002-TIOL-321-SC-CX refers.

++ The SCN dt. March, 1998 has been issued u/r 9B for finalization of provisional assessment and not under section 11A for recovery of any short levy or non-levy. In the assessment order issued in pursuance to the said notice, it is clearly stated that the assessment is being finalized in terms of the said order. In view of the factual position as evident from the records, the appellant's contention that show cause notice has been issued under section 11A is factually incorrect.

++ The amount of demand confirmed is not more than the amount demanded in the show cause notice. Since the assessment was provisional, the rate of duty, classification and valuation etc. could be modified at the time of finalization of assessment. And the case laws cited are distinguishable.

The Bench reproduced verbatim the extracts from order of the Tribunal passed in the earlier round of litigation and inter alia observed -

++ From the order of the Tribunal, it is absolutely clear that the matter was remanded only for the limited purpose of re-calculating the demand for the period June 1991 to September, 1997 and from 1-4-98 to 31-3-1999, by classifying the product MVAC manufactured by the appellant under CETH 8418.10 as refrigerating equipment. The said order did not grant any liberty whatsoever to the assessing authority to re-open the issue of classification. Therefore, the appellant's contention that show cause notice should have been issued for the proposed classification and the appellant should have been heard once again is clearly unsustainable and has to be rejected outright.

++ It is true that the appellant has challenged the above order of this Tribunal before the Apex Court which is said to have been admitted and pending. However, the appellant has not been able to obtain any stay against the said order. Thus the classification, as laid down by the Tribunal in the said order dated 22.01.2009 shall prevail unless and until it is set aside by the Apex Court. Further in the said order, the Tribunal has considered the submissions made by the appellant in support of classification as a heat pump and its claim for benefit under notification 155/86-CE. After considering all the relevant aspects, namely, the product's functions and its usage, technical literature, HSN Explanatory Notes, various Tribunal and Apex Court decisions relevant to the classification the product, the Tribunal has recorded a detailed finding and has classified the product. Therefore, it cannot be the case that the appellant were never afforded an opportunity to canvass their views. In this factual position, we do not find any merit in the appellant's contention that they should have been given one more opportunity by the assessing officer as regards the proposed classification. In any case, the assessing officer was neither directed to give such an opportunity nor could he have come to a different view, in view of the decision of this Tribunal with respect to classification which is binding on the lower authorities. The lower authorities have merely carried out the directions of this Tribunal to re-calculate the duty and in the absence of any challenge to such re-calculation by the appellant, the present appeal is liable to be rejected and we hold accordingly.

++ It is a settled position in law as held by the apex Court in Al Noori Tobacco Products India Ltd. case - 2004-TIOL-85-SC-CX that the ratio of a decision can be applied only if the facts are identical. A slight or a material change in the facts could lead to an entirely different conclusion. In both the cases relied upon by the appellant, the issue therein did not relate to finalization of a provisional assessment which was under challenge before the Tribunal. Further in those cases, the Tribunal also did not give any specific direction as to how the finalization of the provisional assessment should be done. Thus the facts involved in those cases are different and distinguishable. Therefore, following the ratio of the decision of the apex court in the Alnoori Tobacco case (supra), it has to be held that the ratio of the decisions in the Hindustan Polymer and Warner Hindustan case is not applicable.

++ In the facts of the case, in the order dated 22.01.2009, this Tribunal set aside the final assessment done by the lower authorities and directed the assessing officer to undertake re-assessment as per the classification decided by the Tribunal and to re-compute the differential duty liability. Thus the remand order passed by the Tribunal restored the provisional assessment resorted to earlier by setting aside the final assessment order and it is in pursuance of the said remand order, the jurisdictional Dy. Commissioner passed the re-assessment order and confirmed the differential duty liability. This is clearly evident in paragraph 14 (ii) and (iii) of the order dated 31.12.2009. Thus the assessing officer has finalized the provisional assessments vide the impugned order.

++ A provisional assessment retains its provisional character for every purpose.

++ In view of the factual and legal position, we do not find any merit in the contention of the appellant that a show cause notice should have been issued to the appellant under Section 11A before the Dy. Commissioner finalized the provisional assessment.

++ In the notice dated 01.03.98 which was issued for finalization of provisional assessment, the differential duty sought to be recovered was Rs.37.05 Crore approx whereas in the final assessment order, the demand confirmed is only Rs.5,30,86,840/- which is much less than that proposed in the notice. Thus there is no infirmity in the assessment order passed by the Deputy Commissioner as the enhancement of rate of duty has not resulted in confirmation of any amount more than that proposed in the show cause notice.

The appeal filed by the assessee was dismissed.

(See 2014-TIOL-2418-CESTAT-MUM)