Duty liability on fully manufactured vehicles rests with job worker, not chassis manufacturers

The Tribunal held that the duty liability and correct valuation of a fully manufactured motor vehicle rested with the job worker, not the appellants who only manufactured chassis with engines. As there was no job work arrangement between the parties for Central Excise provisions, the Tribunal found in favor of the appellants. The impugned order confirming a significant differential duty against the appellants was set aside, and the appeal was allowed.

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Issues: Valuation of fully manufactured motor vehicle cleared by job worker, differential duty liability, applicability of Central Excise provisions.

In this case, the appellants, engaged in manufacturing motor vehicle chassis, cleared chassis with engines and paid applicable Central Excise duty. The issue arose when a job worker further manufactured the full motor vehicle by building the body and cleared the goods on payment of duty. The Revenue contended that the correct valuation of the fully manufactured motor vehicle should be based on the transaction value and not the cost plus processing charge as adopted by the job worker. A differential duty of Rs. 22,19,802 was confirmed against the appellant for the period March 2008 to October 2010.

The appellant argued that they did not follow the job worker procedure under the relevant notification and thus should not be liable for any duty related to the fully manufactured vehicle done by the job worker. They maintained that as they did not manufacture the motor vehicle during the relevant period, no duty liability or differential duty could be confirmed on them for the vehicle manufactured by a third party on a job work basis.

The Revenue, however, supported by the lower authorities, contended that since the job worker was not the owner of the goods, they could not arrive at the proper valuation, and thus, the appellant, as the owner, should discharge the duty based on the full transaction value.

After hearing both parties, the Tribunal noted that the appellants had only manufactured chassis with engines and cleared them after paying duty. The full motor vehicle was not manufactured by the appellants themselves but by the job worker. As there was no job work arrangement linking the appellants and the job worker for Central Excise provisions, including differential duty, the Tribunal found no merit in the Revenue's claim. The Tribunal concluded that the duty liability and correct valuation of the fully manufactured vehicle rested with the actual manufacturer, the job worker, and not the appellants. Therefore, the impugned order was set aside, and the appeal was allowed.

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