Motor vehicle body building under Heading 87.07 qualified for excise exemption and refund, with cess demand unsustainable.

Body building on duty-paid motor vehicle chassis was treated as manufacture of bodies for motor vehicles and classifiable under Heading 87.07, not as manufacture of the motor vehicle itself. On that basis, the activity fell within the scope of Notification No. 175-C.E. dated 1-3-1986, subject to the prescribed monetary limit, so excise duty collected after the notification lacked authority. The assessee was entitled to refund of duty already paid if the burden had not been passed on to customers, and the cess demand was also not sustainable in view of the accepted departmental position.

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Issues: Whether body building on duty-paid chassis of motor vehicles fell under Heading No. 87.07 of the Central Excise Tariff Act, 1985 and was entitled to the benefit of Notification No. 175-C.E. dated 1-3-1986, with consequential refund of basic excise duty and cess already collected.

Analysis: The activity in question was confined to manufacture of bodies on chassis supplied for use as buses or goods trucks. Heading No. 87.07 specifically covers bodies, including cabs, for motor vehicles of Headings 87.01 to 87.05, whereas Headings 87.02 and 87.04 relate to motor vehicles themselves. On that basis, body building on a chassis could not be treated as manufacture of the motor vehicle itself. Since the goods manufactured by the petitioner fell within Heading 87.07, the exemption under Notification No. 175-C.E. dated 1-3-1986 applied, subject to the prescribed monetary limit. The levy collected after the notification was therefore without jurisdiction, and the assessee was also entitled to refund of duty already paid if it had not been passed on to customers. The cess demand stood accepted as not being leviable in view of the departmental position.

Conclusion: The body-building activity was classifiable under Heading 87.07 and the assessee was entitled to the benefit of Notification No. 175-C.E. dated 1-3-1986, with refund of excise duty already paid if not recovered from customers; the cess recovery also could not stand.

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