Exemption on motor vehicle bodies denied where Cenvat credit on inputs was taken and Rule 6 amount was undervalued.

Exemption under Notification No. 3/2001-CE and Notification No. 6/2002-CE was unavailable where Cenvat credit had been taken on inputs used to fabricate motor vehicle bodies, because the exemption required manufacture from duty-paid chassis and non-availment of credit on the chassis and other inputs. The document states that once the clearances were treated as exempt, the amount under Rule 6(3)(b) had to be computed on the value of the exempted goods as complete vehicles, not merely on the body portion. Payment confined to the body value was therefore insufficient, and the duty demand with interest was upheld in favour of Revenue.

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Issues: Whether the respondent was entitled to exemption under Notification No. 3/2001-CE and Notification No. 6/2002-CE despite availing Cenvat credit on inputs used in fabrication of motor vehicle bodies, and whether the amount payable under Rule 6(3)(b) of the Cenvat Credit Rules had been correctly computed.

Analysis: The exemption was conditioned on manufacture of vehicles from duty-paid chassis and on non-availment of credit on both the chassis and the other inputs used in manufacture. Since credit was admittedly taken on other inputs, the condition attached to the exemption was not satisfied. Once the clearance was treated as under exemption, the goods had to bear the amount mandated by Rule 6(3)(b) on the value of the exempted goods, namely the complete vehicle and not merely the body portion. The payment made only on the value of the bodies was therefore held to be insufficient.

Conclusion: The respondent was not entitled to the exemption and the duty demand with interest was upheld in favour of Revenue.

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