Central excise duty cannot be separately levied on chassis modification charges where chassis value is excluded under the exemption scheme.

Consideration received for rectification, upgradation or replacement of leaf springs on a duty-paid chassis used for body building was not liable to separate central excise duty. The activity was linked to modification of components forming part of the chassis, not to an independent manufacture of the vehicle body, and the exemption scheme required exclusion of chassis value for concessional duty purposes. Even if the work was treated as manufacture, it was manufacture on the chassis and did not create a distinct taxable value. The demand was therefore held unsustainable.

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Issues: Whether differential central excise duty was payable on the consideration received for rectification, upgradation, or replacement of leaf springs in chassis supplied for body building.

Analysis: The amount received was connected with modification or replacement of leaf springs forming part of the chassis and not with an independent manufacture of the vehicle body. The chassis was already a duty-paid manufactured item, and the relevant exemption notifications required exclusion of the chassis value for concessional duty purposes. Even if the activity was treated as manufacture, it was manufacture on the chassis, not a separate taxable activity warranting demand on the amount received. The reasoning adopted by the lower authority was therefore unsustainable.

Conclusion: The demand was not sustainable and the assessee was not liable to pay differential central excise duty on the impugned amount.

Ratio Decidendi: Where a consideration is received for modification or replacement of components that are part of a duty-paid chassis used for body building, and the applicable exemption scheme excludes chassis value, such consideration cannot be separately subjected to central excise duty as an independent taxable value.

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