Assessable value for ambulance bodies excluded duty-paid chassis value before Chapter 87 Note 4; demand and penalty failed.

Building a body on a duty-paid chassis was not treated as manufacture during the pre-amendment period before Note 4 to Chapter 87 came into force. As a result, only the value of the body was liable to duty, and the chassis value could not be included in the assessable value. The exemption claimed for the chassis under Notification No. 241/86-C.E., read with the Board's circular and the Supreme Court ruling referred to, supported this position. The demand and penalty were therefore unsustainable.

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Issues: Whether, for clearance of an ambulance built on a duty-paid chassis before insertion of Note 4 in Chapter 87, the value of the chassis was includible in the assessable value and the assessee was liable to duty on the entire vehicle.

Analysis: The activity of building a body on a duty-paid chassis did not amount to manufacture during the relevant period, as the deeming provision treating such activity as manufacture came into force only later. In the circumstances, the assessee was liable only on the value of the body built on the chassis. The exemption claimed in respect of the chassis under Notification No. 241/86-C.E. supported this position, and the Board's circular, read with the Supreme Court ruling relied upon, confirmed that the pre-amendment period was governed by that understanding. The lower authorities were therefore not correct in including the chassis value in the assessable value.

Conclusion: The value of the chassis was not includible in the assessable value, and the demand and penalty were unsustainable. The appeal succeeded in favour of the assessee.

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