Hybrid electric vehicles did not qualify for compensation cess relief because the electric motor was only assistive, not a propulsion motor.

Hybrid electric vehicles were not covered by serial no. 48(d) of Notification No. 1/2017-Compensation Cess (Rate), as amended, because the entry applied only where both the compression-ignition engine and the electric motor functioned as motors for propulsion. The AAR held that an electric motor must independently propel the vehicle, not merely assist the engine through start-stop, regenerative or boosting functions. As the applicant's own description showed only assistive use of the motor, and the certificates relied on did not establish propulsion capability, the essential condition for the concessional entry was not met. The vehicles were therefore not liable to compensation cess at 15% under that entry.

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Issues: Whether the hybrid electric vehicles supplied by the applicant were covered by serial no. 48(d) of Notification No. 1/2017-Compensation Cess (Rate), as amended, so as to attract compensation cess at 15%.

Analysis: Serial no. 48 applied only to vehicles having both a compression-ignition internal combustion piston engine and an electric motor as motors for propulsion. The Authority held that the phrase required the electric motor itself to be capable of propelling the vehicle and not merely assisting the engine. On the applicant's own description, the electric motor acted as an assistive power booster, enabled start-stop and regenerative functions, and did not independently propel the vehicle. The certificates relied upon showed compliance with motor vehicle norms but did not establish that the electric motor was a motor for propulsion. The applicant therefore failed to satisfy the essential condition of serial no. 48(d).

Conclusion: The vehicles were not covered by serial no. 48 of Notification No. 1/2017-Compensation Cess (Rate), as amended, and were not leviable to compensation cess at 15% under that entry.

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