SC upholds CESTAT order of classifying MVACs as refrigerating equipment & not heat pump

Case Details: Thermax Ltd. v. Commissioner of Central Excise - [2022] 143 taxmann.com 181 (SC)

Judiciary and Counsel Details

• • K.M. Joseph & Hrishikesh Roy, JJ.

Facts of the Case

The appeal was filed before the Supreme Court against the order of CESTAT which held that Modified Vapour Absorption Chiller (MVACs) to be classified as refrigerating equipment and not heat pump. The appellant was of view that MVACs would be treated as heat pump and the question would become important because heat pumps falling under Chapter 8418 enjoyed a limited exemption from the levy of excise duty.

Supreme Court Held

The Honorable Supreme court noted that if the Principal Purpose Test is applied for the machine manufactured by the appellant, it is quite apparent that the product MVAC is intended to produce chilled water. Moreover, even if the option of availing hot water is available, significantly, the production of chilled water never ceases, while the machine is operating. Therefore, the principal purpose of the machine is undoubtedly to produce chilled water.

Moreover, the use of heat as one of the sources in the air-conditioning system would not take away the primary or basic function of the MVAC, which is to cool and not heat water. The Court also noted that the appellant in their website have identified Vapour Absorption Chillers and heat pumps separately. Therefore, the product manufactured by the appellant would merit classification under Sub-heading 8418.10 of the Central Excise Tariff Act, 1985, in the category of refrigerating equipment.