In Brief
Thermax Ltd. manufactured Modified Vapor Absorption Chillers (MVAC) and claimed classification as "heat pumps" to attract concessional excise duty. The Revenue disputed this, arguing MVAC's primary function is cooling water, with hot water production merely incidental. The Supreme Court upheld the Revenue, holding that the Harmonized System of Nomenclature (HSN) definition of "heat pump"—a device converting heat into more intense heat—does not apply to MVAC, whose primary purpose is chilling water. The Court applied the principal purpose test and market parlance test, confirming customers purchase MVAC for cooling, not heating. Therefore, MVAC must be classified as refrigerating equipment, not heat pumps, and is ineligible for concessional duty.
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