Duty-paid chassis and equipments exemption for special purpose vehicles was upheld despite in-house fabricated body components.

Special purpose motor vehicles classified under heading 87.05 remained eligible for exemption under Notification No. 5/98-C.E. where the vehicles were manufactured from duty-paid chassis and purchased duty-paid equipments. In-house fabricated items used in body-building did not become separate commercial goods or independent equipments capable of performing a complete function, so they were treated as integral components of the vehicle bodywork. On that basis, the notification condition was satisfied, the exemption was available, and the demand was unsustainable with consequential relief to the assessee.

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Issues: Whether special purpose motor vehicles classifiable under heading 87.05 were entitled to exemption under Notification No. 5/98-C.E. despite in-house fabrication of certain components, and whether such fabricated items could be treated as non-duty-paid equipments so as to deny the notification benefit.

Analysis: The condition in the notification required the vehicles to be manufactured out of chassis and equipments on which duty of excise or additional duty had already been paid. The chassis and purchased items were duty-paid. The fabricated items were found to be part of the body-building process, not independent commercial goods, and did not come into existence as separate equipments capable of performing a complete function. They were therefore treated as components of the vehicle bodywork rather than as equipments within the meaning of the notification.

Conclusion: The notification condition was held to be satisfied and the exemption was available to the assessee.

Final Conclusion: The demand was unsustainable and the assessee was held entitled to the exemption with consequential relief.

Ratio Decidendi: Items fabricated as integral parts of vehicle bodywork, which do not emerge as independent marketable equipments, do not defeat an exemption condition requiring duty-paid chassis and equipments.

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