2013 (3) TMI 430 - AT - Central Excise

Tribunal corrects classification of vehicle parts, grants relief to appellant

CASE NEW HOLLAND CONSTRUCTION Versus COMMISSIONER OF C. EX., INDORE

The Tribunal granted relief to the appellant, finding the Department's classification of Wheeled Tractor Loader Backhoe (WTLB) and Vibrating Compactor ... Chargeablity to central excise duty - Wheeled Tractor Loader Backhoe (WTLB) and Vibrating Compactor (VC) - Denial under sub-heading no. 84295900 and 84305090 for the period June, 2006 to June, 2011 - Held that:- WTLB and VC are classifiable under Headings 8429 and 8430 respectively and parts and components of these machinery would be covered under Heading No. 8431. However, during the period till 28-4-2010, Sl. No. 100 of the 3rd Schedule to the Central Excise Act, 1944 covered “parts, components and assemblies of Automobiles”. Thus so far as the period prior to 29-4-2010 is concerned, the Department’s stand in the impugned order is not correct. It is settled law that the words, in a statute are to be understood in their context and a statute must be read as a whole, and extension of this rules of context permits reference to other statute in pari materia i.e. statute dealing with the same subject matter or forming the part of the same system. As decided in MSCO Pvt. Ltd. v. Union of India (1984 (10) TMI 44 - SUPREME COURT OF INDIA) it is hazardous to interpret a word in a statute, in accordance with its definition in another statute or statutory instrument and more so when such statute or statutory instrument is not dealing with the cognate subject. Thus meaning of the term “Automobile” in Entry No. 100 of the Third Schedule to the Central Excise Tariff Act, 1944 should therefore, be understood on the basis of how the term “Automobile” is understood in the cognate statute of Central Excise Tariff Act, 1985 and its schedule. The definition of “Automobile” in Motor Vehicle Act, 1988 or Air (Prevention and Control of Pollution) Act, 1981, which deal with altogether different subjects, cannot be adopted for construing this term in Central Excise Act, 1944. When in the schedule to the Central Excise Tariff Act, WTLB and VC are understood as construction machinery falling under Chapter 84 and not as “Automobile” of Chapter 87, it would be totally wrong to apply definition of the term “Automobile” in Motor Vehicle Act, 1988 and Air (Prevention and Control of Pollution) Act, 1981 which are for altogether different purposes, and hold that this term covers WTLB and VC also. More so, when the Board’s Circular No. 167/38/2008-CX., dated 16-12-2008 also supports the appellant’s stand. As regards the period w.e.f. 29-4-2010, prima facie, the goods in question are covered by S. No. 100A of the 3rd Schedule of the Central Excise Act, 1944 and have packing/re-packing of parts of WTLB and VC would attract excise duty. But for this period, it is not disputed that the appellant have paid the duty of Rs. 1,79,75,486/-. Besides this, it is also not denied that they have paid an amount of Rs. 60 lakhs during investigation, besides furnishing the guarantee of Rs. 1,15,84,774/-. Therefore, the amount already deposited by the appellant is sufficient for hearing of these appeals. The requirement of pre-deposit of balance amount of duty demand, interest and penalty is, therefore, waived for hearing of the appeals and recovery thereof is stayed till the disposal of the Appeal. Issues Involved:1. Classification of Wheeled Tractor Loader Backhoe (WTLB) and Vibrating Compactor (VC) parts as automobile parts.2. Applicability of the term 'manufacture' to repacking of WTLB and VC parts.3. Interpretation of the term 'Automobile' in the context of Central Excise Act, 1944.4. Validity of duty demands and penalties imposed by the Commissioner.5. Eligibility for Cenvat credit on duty-paid components.6. Requirement of pre-deposit for hearing the appeals.Detailed Analysis:1. Classification of Wheeled Tractor Loader Backhoe (WTLB) and Vibrating Compactor (VC) parts as automobile parts:The appellant manufactures construction equipment classified under Central Excise Tariff headings 84295900 and 84305090. They also trade in spare parts of WTLB and VC, which are repacked for retail sale. The dispute centers on whether these parts should be classified as 'automobile parts' under Entry No. 100 of the Third Schedule to the Central Excise Act, 1944, prior to 29-4-2010. The Department argues that WTLB and VC, as self-propelled machinery, fall under the definition of 'Automobile' per the Motor Vehicle Act, 1988, and the Air (Prevention and Control of Pollution) Act, 1981. The appellant contends that WTLB and VC are construction machinery under headings 8429 and 8430, and their parts under heading 8431, should not be classified as automobile parts.2. Applicability of the term 'manufacture' to repacking of WTLB and VC parts:Section 2(f)(iii) of the Central Excise Act, 1944, states that packing or repacking of goods listed in Schedule III amounts to manufacture. The Department issued show cause notices demanding duty on the ground that repacking WTLB and VC parts for retail sale constitutes manufacture. The appellant argues that the parts of WTLB and VC are not automobile parts and thus repacking them does not amount to manufacture under the relevant entry.3. Interpretation of the term 'Automobile' in the context of Central Excise Act, 1944:The appellant relies on Board's Circulars No. 22/90 and No. 167/38/2008-CX., which clarify that construction machinery parts should not be treated as automobile parts. The appellant also cites the Supreme Court's judgment in MSCO Pvt. Ltd. v. UOI, which states that terms in a statute should be interpreted based on their ordinary meaning or as understood in the relevant context, not by definitions in unrelated statutes. The Tribunal agrees with the appellant's interpretation, stating that the term 'Automobile' in the Third Schedule should be understood in the context of the Central Excise Tariff, where WTLB and VC are classified as construction machinery.4. Validity of duty demands and penalties imposed by the Commissioner:The Commissioner confirmed a total duty demand of Rs. 13,40,71,400/- along with interest and imposed a penalty of Rs. 3,25,00,000/-. The Tribunal finds the Department's interpretation for the period prior to 29-4-2010 incorrect and supports the appellant's view that WTLB and VC parts are not automobile parts. For the period after 29-4-2010, the Tribunal acknowledges that the parts are covered by Entry No. 100A and repacking would attract excise duty, which the appellant has already paid.5. Eligibility for Cenvat credit on duty-paid components:The appellant argues that even if repacking amounts to manufacture, they are eligible for Cenvat credit on the duty-paid components. The Tribunal notes that the Commissioner did not address the eligibility for Cenvat credit and implies that the appellant's duty liability would be minimal after accounting for Cenvat credit.6. Requirement of pre-deposit for hearing the appeals:Considering the amounts already paid by the appellant (Rs. 60 lakhs during investigation, Rs. 1,79,75,486/- for the period after 29-4-2010, and a bank guarantee of Rs. 1,15,84,774/-), the Tribunal finds these sufficient for hearing the appeals. The requirement of pre-deposit of the balance amount of duty demand, interest, and penalty is waived, and recovery is stayed until the disposal of the appeals.Conclusion:The Tribunal grants the appellant relief for the period prior to 29-4-2010, finding the Department's classification incorrect. For the period after 29-4-2010, the Tribunal acknowledges the duty liability but notes the appellant's compliance with payments. The appeals are admitted without requiring further pre-deposits, and the recovery of the remaining amounts is stayed.