2005 (1) TMI 499 - AT - Central Excise

Tribunal exempts auto builders from excise duty on fabricated bodies, citing specific government notification.

KAILASH AUTO BUILDERS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BHOPAL

The Tribunal allowed the appeals filed by M/s. Kailash Auto Builders Ltd., holding that they were not liable to pay central excise duty under Heading ... Motor Vehicles - Body building on Motor vehicle chassis Issues:1. Whether central excise duty is chargeable under Heading 87.07 of the Schedule to the Central Excise Act for bodies fabricated on chassis.Analysis:The appellant, M/s. Kailash Auto Builders Ltd., raised three appeals concerning the central excise duty chargeability under Heading 87.07 for bodies fabricated on chassis. The appellant argued that they are independent manufacturers of excisable goods, building bodies on motor vehicle chassis received from customers. They claimed exemption under specific notifications but were denied by the Commissioner (Appeals) who held that central excise duty is payable on bodies of motor vehicles under Heading 87.07. The appellant contended that even if duty is payable under Heading 87.07, they are not liable for additional duty under a specific notification issued by the Central Government. The period under dispute was from March 1995 to December 1999, covered by the relevant notification. Reference was made to a previous decision in Jay Cee Coach Builders Ltd. v. C.C.E., Chandigarh-I - 2003 (159) E.L.T. 297 (Tri.).The Tribunal examined the submissions and noted that the appellants are independent body builders fabricating bodies on motor vehicle chassis. Note 3 to Chapter 87 defines that building a body on chassis constitutes 'manufacture' of a motor vehicle. The Tribunal cited a previous case, Kamal Auto Industries v. Collector -1996 (82) E.L.T. 558, where it was established that bodies built on chassis remain classifiable under Heading 87.07 even after the introduction of Note 3. This decision was upheld by the Supreme Court, as mentioned in Ambala Coach Builders v. C.C.E. - 2000 (119) E.L.T. 713 (Tri-LB). The Central Government issued a notification exempting duty payment in cases where duty was short-levied during a specific period, which covered the appellants' case. As the appellants had paid duty under the relevant headings and were eligible for the notification benefit, they were not liable to pay any duty. Consequently, the appeals were allowed, and the operative part of the order was pronounced in open court.