Cess levy on body-built vehicles fails where cess was already paid on the chassis, and the related penalty falls too.

Cess was not leviable on vehicles body-built by an independent body builder where cess had already been paid on the chassis, because the applicable clarification required collection from the vehicle manufacturer and not again from the body builder. The demand was therefore unsustainable when the department failed to apply that clarification to the same chassis-based levy. Once the substantive cess demand failed, the connected penalty could not survive and was also liable to be set aside.

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Issues: Whether cess was leviable on vehicles body-built by an independent body builder when cess had already been paid on the chassis, and whether the penalty sustained with such demand could survive.

Analysis: The circular relied upon clarified that the cess intended under the industrial development and regulation framework was to be collected from the vehicle manufacturer and not again from an independent body builder. It further indicated that where cess had already been discharged on the chassis, no fresh levy was warranted when the body was built on that chassis by another person. As the departmental authorities did not apply this clarification, the demand of cess was unsustainable. Once the substantive levy failed, the penalty imposed on the appellant also could not be maintained.

Conclusion: The cess demand on the body-built vehicles was not leviable and the penalty was liable to be set aside.

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