Body-building on supplied chassis is manufacture of vehicle bodies, not complete motor vehicles, so small-scale exemption applies.

Body-building on duty-paid, customer-supplied chassis was treated as manufacture of bodies of motor vehicles, not manufacture of motor vehicles themselves. The Tribunal followed binding High Court rulings and classified the activity under Heading 87.07 of the Central Excise Tariff Act, 1985. On that classification, Notification No. 175/86-C.E. was held applicable, so the small-scale exemption was available. The lower authority's contrary classification was found unsustainable and the impugned orders were set aside.

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Issues: Whether body-building activity carried on duty-paid chassis of motor vehicles amounted to manufacture of motor vehicles or only manufacture of bodies of motor vehicles, and whether Notification No. 175/86-C.E. exempted such goods.

Analysis: The Tribunal followed the binding High Court rulings holding that a person who only builds or fabricates bodies for buses and trucks on chassis supplied by customers does not manufacture motor vehicles. Such activity results only in the manufacture of bodies of motor vehicles, which fall under Heading No. 87.07 of the Central Excise Tariff Act, 1985. On that basis, the exemption under Notification No. 175/86-C.E. was held applicable to the goods in question.

Conclusion: The classification adopted by the lower authority was not sustainable and the small scale exemption was available; the appeals were allowed.

Final Conclusion: The impugned orders were set aside and the appellants succeeded on the classification and exemption issues.

Ratio Decidendi: Where an assessee only fabricates or builds bodies on customer-supplied chassis, the activity is manufacture of bodies of motor vehicles and not manufacture of motor vehicles, and the goods are classifiable accordingly for exemption purposes.

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