Holding

The Tribunal erred by not analysing each item individually and by improperly applying the ratio of PSI Data System Ltd.; the matter is remitted to the Tribunal for fresh consideration of valuation and limitation.

Summary

Allied Air‑Conditioning Corp manufactured package‑type air conditioners that were cleared in a knocked‑down condition and assembled on site. The Commissioner of Central Excise alleged duty evasion and invoked the extended period of limitation under the proviso to Section 11(A) of the Central Excise Act, 1944, assessing duty and penalties. The Tribunal remanded the matter for fresh consideration, later allowing the assessee’s appeal on the basis of PSI Data System Ltd. case but upholding the extended limitation period. The Supreme Court held that the Tribunal failed to analyse each component individually, did not explain the relevance of the PSI Data ratio, and did not examine the parties’ positions on limitation. Consequently, the Court remitted the case to the Tribunal for a detailed re‑examination of valuation and limitation issues.

Issues considered

Whether package‑type air conditioners cleared in a knocked‑down condition and assembled on site are assessable as air conditioners under the Central Excise Tariff Act, 1985.
Whether the extended period of limitation under the proviso to Section 11(A) of the Central Excise Act, 1944 is applicable to the assessment of duty and penalty.
Whether the Tribunal was correct in relying on the ratio of PSI Data System Ltd. v. CCE in the present factual scenario.

Legislation cited

Central Excise Act, 1944s. 11(A)
Central Excise Rules, 1944s. 173, s. 226, s. 9(2)
Central Excise Tariff Act, 1985s. Chapter heading 84.15, s. Tariff Item No. 29‑A
Constitution of Indias. Article 141

Subjects

central excisevaluationpackage type air conditionerknocked down conditionextended limitation periodSection 11(A)tariff classificationaccessory vs componentpenaltyCEGATPSI Data case

Judgment

COMMISSIONER OF CENTRAL EXCISE, DELHI A
v.
MIS. ALLIED AIR-CONDITIONING CORPORATION (REGO.)

/
.,, SEPTEMBER 13, 2006

[ARIJITPASAYAT ANDS.H. KAPADIA,JJ.] B

Central Excise Tariff Act, I985-Tariff and Chapter heading No.84.15-
Item No. 29-A-Package type Air Conditioner-Excise duty-levy of-
Assessee's case that package type air conditioner cleared in knocked down
condition, assembled directly at site and valuation of items involved to be
c
excluded-As such not assessable as air conditioners and extended period
of limitation not applicable-Tribunal relying on PSI Data's case allowed
assessee 's case but invoked limitation-Correctness of-Held: Tribunal did
not indicate the relevancy of the ratio of PSI Data's case which was on
different facts-It did not analy~e each item individually and also did not D
examine the stand of the parties on /imitation-Hence, matter remilled back-
Central Excise Act, 1944-Section ll(A) proviso-Precedent.

Precedents: Reliance on decision-Scope of-Held: Judgment should
be read as whole-It should be understood in the light of the facts of the
case-Nothing more should be read into it than what it actually says- E
Constitution of India, 1950-Article 141.

Respondent-assessee was the manufacturer of package type Air
Conditioners. Appellant-department alleged that the respondent was selling
the air conditioners by assembling the same at site through orders procured
from various authorities by way of tenders/contracts regarding nine
F
components. Respondent filed price list for two items and cleared the air
conditioners without payment of duty. Appellant issued notices to the
respondent since there was evasion of duty by mis-declaration; and invoked
extended period under proviso to section l l(A) of the Central Excise Act, 1944.
Respondent contended that packaged type air conditioners were being cleared G
in a knocked down condition an!! were assembled directly at site and were not
-; '
assessable as air conditioners. Appellant confirmed the demand and imposed
penalty. Respondent c~allenged the order. Tribunal did not analyse the
individual items and allowed the appeal relying on PSI Data System Ltd 's case.

41 H
42 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A However, it held that the extended period of limitation was applicable. Hence
the present appeals.

Disposing of the appeals, the Court

HELD: 1.1. A judgment should be understood in the light of facts of the
B 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
C the questions which were before this Court. (46-E-G[
Mehboob Dawood Shaikh v. State of Maharashtra, [2004[ 2 SCC 362,
relied on.

1.2. A bare reading of the Tribunal's order makes the position clear
D that it did not analyse each item individually and also did not indicate as to
how the ratio in PSI Data System ltd 's case had any relevance. The same was
rendered in entirely different factual scenario. [46-E-FI

PSI Data System ltd. v. CCE, (1997) 89 ELT 3 SC, distinguished.

2. Tribunal did not analyse the respective stand of the appellant and the
E respondent on the issue of limitation elaborately. It did not examine in detail
the relevance of various documents pressed into service by the parties in
support of their respective stand. Therefore, the matter is remitted back to
the Tribunal. (46-G-HJ

F Mehra Brothers v. Joint Commercial Officer Madras, [1991 [ I SCC 514;
Star Paper Mills ltd. v. Collector of Central fa:cise, (1989[ 4 SCC 724 and
Hindustan Sanitaryware & Industries ltd. & Lakshmi Cement v. Collector of
Customs, Calcutta, (2000( 10 SCC 224, referred to.

Black's law Dictionary 5th Edn. p. 13 and Webster Comprehensive
G Dictionary International Edition, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1110-11 OJ of
2001.

From the Judgment dated 29.3.2000 in Order No. 193-194/2000-A of the
H
COMMR. OF CENTRAL EXCISE. OELHI .-. ALLIED AIR-CONDITIONING CORPN (REGO.) (PASAY.\T, J.) 43

Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal A
Nos. E/1335 and 1847/97-A.

A.K. Ganguly, Ajay Shanna. Vikram Gulati, B.K. Prasad and Navin Prakash
<\ for the Appellant.

Gauri Shankar Murthy, T.V. Ratnam, H.K. Puri, V. Balachandran, V. B
Lakshmikumaran, Rajesh Kumar, Alok Yadav, Shobna, M.P. Devanath,
Meenakshi Arora and Sanjay Bhat for the Respondents.

The Judgment of the Court was delivered by

ARIJIT PASA YAT, J. These two appeals are directed against a common C
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 D
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 a/ia,
package type Air Conditioners falling under Tariff Item No. 29-A of the E
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: F
I. Compressors
2. Accessories
'
.J, Pumps
G
4. Cooling Towers
--i
5. Humidification & heating etc.
6. Ducting material
7. Plum bil}g material
H
44 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A 8. Civil Work
9. Electrical material

Undisputedly, the respondent was filing its price list in respect of
compressors and assessories i.e. Item Nos. I & 2 as noted above. Premises
B of the respondent, where activitie$ 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
C therefore assessable as air conditioners. Show cause notice was issued on
Ii.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
D period covering assessment year 1986-87 (residual part), 1987-88 and 1988-89.
The extended period under proviso to Section I l(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/-
E 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 CEGA T. 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
F filed the price list in Part J 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, I 79for 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
G 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 EL T 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
H
COMMR. OF CENTRAL EXpSE. DELHI •·.ALLIED AIR-CONDITIONING CORPN. (REGO.) (PASAYAT. J.) 45
furnished along with price list which were filed in Form I and not in Form II A
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 B
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. c
In support of the appeals, Mr. AK Ganguli, learned Senior counsel
submitted that PSl's case (supra) was not applicable to the facts of the
' present case. CEGA T 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 D
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 CEGA Thad taken into account the broad features and had rightly decided
that the val.uation of the items in question were to be excluded. It was .further E
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,
;F
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
a~ article or part is ~~· accessory cannot be decided with reference to its
necessity to its effective use of the goods to which it is joined as a whole. G
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
H
46 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A 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
B 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 ,\fehra Brothers v. Joint Commercial Ojficer, .Madras.
(1991) 1sec514).

In the absence of any definition of the term "component parts" it is
C permissible to refer to the dictionary meaning of the word "component".
According to the Webster Comprehensive Dictionary, International Edition
the word 'component" imer a/ia 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
D 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,
Ca/cul/a, (2000] IO SCC 224).

E A bare reading of the CEGA T's order makes the position clear that it
has not analysed each item individual!y. It has also not indicated how the
ru•io in PSf'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
F 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
G 362. CEGAT has also 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 has not been examined in detail by CEGA T.

In the aforesaid circumstances we deem it proper to remit the matter to
H
COM MR. Of CENTRAL EXCISE, DELHI '" ALLIED AIR-CONDITIONING CORPN. (REGO.) (PASA VAT, I.] 47

CEGA T to consider the stand of the revenue as regards the disputed items A
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.

NJ. Appeal disposed of.