2001 (4) TMI 143 - AT - Central Excise

Tribunal rules against Revenue in excise duty case, finding no liability for differential duty.

The Tribunal rejected the Revenue's appeal, ruling that M/s. Mahindra & Mahindra Ltd. were not liable to pay differential excise duty on motor ... Motor vehicles - Body-builder - Demand - Duty liability Issues Involved:1. Whether duty of excise is payable by M/s. Mahindra & Mahindra Ltd. on goods received from job workers as motor vehicles under Chapter 87 of the Central Excise Tariff Act.2. Application of Section 11D of the Central Excise Act as amended by the Finance Act, 2000.3. Classification and duty payment on chassis and cowl sent to body-builders.4. Determination of the manufacturer of the motor vehicle.5. Applicability of various legal precedents and tests to determine manufacturing and duty liability.Summary:1. Duty of Excise on Motor Vehicles:The primary issue is whether M/s. Mahindra & Mahindra Ltd. (Respondents) are liable to pay excise duty on motor vehicles received from job workers. The Department contended that the Respondents should pay differential duty as they had recovered duty from their customers but did not pay it on the full value of the vehicles sold. The Tribunal found that the body-builders, who fabricated the bodies on the chassis, paid duty under Heading 87.07, and the motor vehicles were complete upon their return to the Respondents. The Tribunal concluded that the tests conducted by the Respondents did not constitute manufacturing, as no new product emerged.2. Application of Section 11D:The Commissioner filed a Misc. Application to take on record Section 11D of the Central Excise Act, which was allowed. The learned DR argued that the Respondents collected duty on the full value of the motor vehicles from their customers. However, the Tribunal noted that the show cause notice was issued before the amendment of Section 11D and that there was no evidence of excess duty collection reflected in the invoices.3. Classification and Duty Payment:The Respondents cleared cowl and chassis on payment of duty to body-builders, who then returned the motor vehicles after fabricating the bodies. The Department argued that the motor vehicles were not fully manufactured until tested by the Respondents. The Tribunal disagreed, stating that the vehicles were complete upon return from the body-builders and that the tests did not result in a new commercial product.4. Determination of Manufacturer:The Tribunal held that the body-builders were the manufacturers of the motor vehicles, not the Respondents. The ownership of the chassis and cowl remained with the Respondents, but this was deemed irrelevant for determining the manufacturer. The Tribunal cited the Supreme Court's decision in Ujagar Prints v. U.O.I., which stated that excise duties are imposed on the production or manufacture of goods, regardless of ownership.5. Legal Precedents and Tests:The Tribunal referenced several legal precedents, including the Supreme Court's decisions in Union of India v. Delhi Cloth & General Mills Co. Ltd. and J.G. Glass, to determine that no new commercial commodity emerged from the tests conducted by the Respondents. The Tribunal also cited the case of Swaraj Mazda Ltd., which had similar facts and held that the duty was levied at the stage of chassis emergence, and the motor vehicle was not manufactured by the assessee.Conclusion:The appeal filed by the Revenue was rejected, with the Tribunal concluding that the Respondents were not liable to pay the differential duty on the motor vehicles, as the body-builders were the manufacturers and had already discharged their duty liability. The provisions of Section 11D were also deemed inapplicable as there was no evidence of excess duty collection.