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Issues: Whether fabrication and mounting of bus bodies on duty-paid chassis is to be treated as manufacture of a motor vehicle classifiable under heading 8702, whether the activity is covered by the exemption under Notification No. 12/2012-CE dated 17.03.2012, and whether the resulting duty demand and penalty could be sustained.
Analysis: The appellants fabricated and mounted bus bodies on chassis supplied by customers. Chapter Note 5 of Chapter 87 of the Central Excise Tariff Act, 1985 treats building of body or fabrication or mounting of structure or equipment on chassis falling under heading 8706 as manufacture of a motor vehicle. On that basis, the activity could not be classified under heading 8707, and the adjudicating authority's view that the vehicle fell under headings 8703 or 8704 was also inconsistent with the admitted passenger capacity of 41 persons. The resulting product was therefore held to fall under heading 8702. The exemption entry for motor vehicles designed to transport more than six persons was found applicable, and the condition requiring duty-paid chassis and non-availment of credit was satisfied because the chassis had suffered excise duty and the appellants were not availing Cenvat credit.
Conclusion: The demand of excise duty was unsustainable, and the penalty, being consequential to the demand, was also not sustainable.
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