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IF your split AC is spewing out hot air, it could be because of a recent change in Excise law. Notification No 50 /2002 dated Sep 25, 2002 has redefined "parts of air-conditioning machines" to exclude therefrom "condensing units and cooling units of split air-conditioning machines." While `parts' would continue to enjoy exemption benefit, `splits' would have to endure more load.

To understand more, one has to read another communiqué from the CBEC that speaks of the essential elements of an air-conditioning machine. These are evaporator (cooling) coil, condenser coil, motor, fan or blower for circulating the air, compressor, and capillary line (expansion valve).

Taking into consideration the CEGAT observation in the Universal Commercial Corporation case - that the components required for completion of one refrigeration cycle would be considered as essential parts of an air-conditioning machine - the Board has now described the anatomy of an AC. Thus, if an assembly or a kit (CKD or SKD) does not have all the above components it will not be considered to have the essential characteristics of an air-conditioning machine and will be classified as `parts'. Also, both the units of a split AC are nothing but `parts' of an AC. (Duty on split AC, however, is 32 per cent, that is, 16 plus 16 per cent.)

About six years ago, the Board had issued a circular clarifying that assemblies or sub-assemblies of parts of air-conditioning machines are different from `parts' and therefore the exemption available to `parts' would not apply to `assemblies/ sub-assemblies'. This clarification was given in the context of a manufacturer clearing the cooling units and the condensing units of split air-conditioners, separately, as parts, and claiming duty exemption. However, field staff faced problems in implementing that clarification since a number of `parts' of air-conditioners are themselves nothing but `assemblies' of smaller parts.

In sum, a sub-assembly or an assembly, which does not have the essential characteristics of the complete machine, will be classified as a `part' of an AC machine and will be eligible for concessional rate of duty under the exemption notification. With effect from Sep 25, 2002 concessional rate will not be available to the cooling and condensing units of split air conditioners though individually each unit will continue to be classified as a part. (Circular No 57/666/2002 dated Sep 25, 2002)

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D. Murali

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