Exemption for fabricated tanker components applies where duty-paid motor vehicles are cleared, despite Heading 8707 classification.

Fabricated container tanks used in the manufacture of LPG tanker assemblies remained eligible for exemption under Notification No. 217/86-C.E. where the final motor vehicle product was cleared on payment of duty under Heading 8704. Although the department treated the fabricated goods as classifiable under Heading 8707, the governing circular recognised such tank fabrication for mounting on chassis as part of road tanker manufacture and did not defeat the exemption. The duty demand was therefore unsustainable.

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Issues: Whether the appellant was entitled to the benefit of Notification No. 217/86-C.E. for container tanks fabricated for road tankers, even where the department treated the fabricated goods as classifiable under Heading 8707.

Analysis: The appellant manufactured LPG tanker assemblies and cleared the final product as motor vehicles for transport of goods under Heading 8704, discharging duty accordingly. The disputed tanks were fabricated in the appellant's premises and mounted on running and non-running gear. The governing circular clarified that container or tank fabrication for mounting on chassis in the manufacture of road tankers would be regarded as fabrication of bodies for motor vehicles under Heading 8707, but would still qualify for exemption under Notification No. 217/86-C.E. where the final product under Heading 8704 had suffered duty at the appropriate rate.

Conclusion: The appellant was eligible for the benefit of Notification No. 217/86-C.E., and the demand confirming duty was unsustainable.

Final Conclusion: The appeal succeeded on the exemption issue, and the impugned order confirming the differential duty was set aside.

Ratio Decidendi: Fabricated components used in the manufacture of a duty-paid final product remain eligible for exemption under Notification No. 217/86-C.E., even if the fabricated goods are otherwise treated as classifiable under Heading 8707.

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