‘Bulk Milk Coolers’ provided to Co-Operative Societies for Storage eligible for Duty Exemption as ‘Stationary Pre-cooling Equipment’: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Ahmedabad held that Bulk Milk Coolers that are manufactured and supplied to various Co-operative societies for storing milk is to be classified as ‘Stationary Pre-Cooling Equipment’ and is eligible for duty exemption.

The appellant M/s Krish Industries Pvt. Ltd. is engaged in the manufacture of Bulk Milk Coolers and Stainless Steel Bulk Cooking Equipments and Distribution vessels. The Bulk Milk Cooler was manufactured from April 2010 and the Appellant classified the same as Stationary Pre-cooling equipment under CETH 84186990. They claimed exemption from payment of duty in terms of Notification No. 6/2006 – CE dated. 01.03.2006 (Serial No.5) and Notification No. 12/2012 – CE dated. 17.03.2012 (Serial No.232).

The revenue department, after investigation, issued show cause to the Appellant alleging that the bulk cooler manufactured by the Appellant and mentioned as ‘Stationary pre-cooling equipment’ is not supplied for installation of any Cold Storage, Cold Room or refrigerated vehicle but supplied to various Milk Co-operative societies to store milk and cool it at 4 degree Celsius. Consequentially, the revenue department demanded a duty of Rs. 1,52,12,471/- on goods cleared along with interest and to impose a penalty under section 11AC read with Rule 25 of Central Excise Rules(CER),2002.

The revenue believed that the said product cannot be classifiable as refrigerating equipment under chapter heading No. 8418 but as per its specific function, the Bulk Milk Cooler deserves the classification only under Chapter heading No. 8419 of the Central Excise Tariff Act, 1985 (CETA). The heading 8418 of the Central Excise Traffic Act applies to refrigerators, freezers and other refrigerating or freezing equipment whereas the tariff item 8419 of the CETA, 1985 applies to machinery, plant for treatment of material by a process involving a change of temperature.

The West Zonal Bench of the CESTAT Ahmedabad consisting of Judicial Member Mr. Ramesh Nair and Technical member Mr. Raju held that “from the facts of the case no contumacious conduct of the Appellant is appearing. They had a bonafide belief that Bulk Milk Cooler is exempted from payment of duty by virtue of exemption notification supra. In such case, it cannot be said that the Appellant had any intention to suppress the fact . . . we hold that the Appellant being eligible for exemption are not liable for duty. Resultantly we set aside the impugned order and allow the appeal with consequential reliefs to the Appellant, if any, in accordance with the law.”