2025 (3) TMI 956 - AT - Central Excise

Excise duty demands on re-packed earthmoving equipment spare parts classified as automobile parts under Sl. No.100 not sustainable

Larsen & Toubro Limited, J. Kumar and Proficient Equipment Solutions Versus Commissioner of Central Excise & Customs, Nagpur

The CESTAT Mumbai held that excise duty demands on re-packed spare parts of earthmoving equipment classified as automobile parts under Sl. No.100 of the ... Process amounting to manufacture or not - activities undertaken at the Central warehouse, where the activity of packing, re-packing and labelling was carried out by the appellant - demand of excise duty on re-packed spare parts on the ground that these goods were parts of motor vehicles (automobiles) and these parts were covered under Sl. No.100 of the Third Schedule to the Central Excise Tariff Act, 1985 - HELD THAT:- The issue involved in this appeal was decided by the Larger Bench of the Tribunal in M/s. Action Construction Equipment Ltd, Shri P.K. Bansal, Shri Vijay Agarwal, Commissioner of Central Excise, M/s. JCB India Ltd., Tata Hitachi Construction Machinery Co. [2023 (6) TMI 1320 - CESTAT MUMBAI (LB)]. The present appeal is also covered by such order of the Larger Bench. On careful reading of the decision given by the Larger Bench of the Tribunal on the disputed issues, it is found that the amendment carried out w.e.f. 29.04.2010 makes it abundantly clear that a legislature did not intend to tax the parts, components and assemblies of earthmoving equipment etc. under the Head “Automobiles”; therefore, to this extent, the adjudged demands for the period prior to 29.04.2010 cannot be sustained. Further, it is noted that the respondents-assessee have paid Central Excise duty for the period post 29.04.2010, and such duties paid have also been appropriated by the Department vide Order-in-Original dated 13.07.2012. Thus, there is no dispute in this regard for the period post 29.04.2010, which is required to be examined in this case. Moreover, Larger Bench has deliberated on the issue whether the earthmoving equipment etc. can be considered as automobiles in the case of respondent-JCB India Ltd. itself. In finally answering the issues on which reference was made to Larger Bench, on account of difference of opinion between two Co-ordinate Benches of the Tribunal and based on the direction given by the Hon’ble Supreme Court, it was held 'The amendment made in the Third Schedule to the Central Excise Tariff Act by Finance Act, 2011 w.e.f. 29.04.2010 by adding serial no. 100A to the Third Schedule is prospective in nature.' Thus, on the basis of the decision given by the Larger Bench, it is concluded that the adjudged demands for the period October, 2006 to 28.04.2010 is not sustainable. Conclusion - i) The term 'automobile' should be interpreted based on common parlance and dictionary definitions rather than definitions from other statutes. ii) The activities undertaken by the appellant did not amount to 'manufacture' for the relevant period, and the classification of the parts as 'automobiles' was not applicable. Therefore, the excise duty demands were not legally sustainable. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered was whether the activities of packing, repacking, and labeling of spare parts of earthmoving equipment by the appellants constituted 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944, necessitating the payment of central excise duty for the period from July 2007 to April 2011. A related issue was whether the parts and components of earthmoving equipment should be classified under the term 'automobiles' for excise duty purposes, particularly in light of amendments to the Third Schedule of the Central Excise Tariff Act effective from April 29, 2010.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework centered on the interpretation of 'manufacture' as defined in Section 2(f)(iii) of the Central Excise Act, 1944, and its application to the activities of packing and labeling. The Third Schedule of the Central Excise Tariff Act, particularly Serial No. 100 and its amendment by the Finance Act, 2011, was crucial in determining the classification of parts and components of earthmoving equipment as 'automobiles.' The Tribunal also considered the Motor Vehicles Act, 1988, and the Air (Prevention and Control of Pollution) Act, 1981, for definitions that could influence the interpretation of 'automobiles.'Court's Interpretation and ReasoningThe Tribunal, guided by the Larger Bench's findings, concluded that the activities of packing and labeling did not constitute 'manufacture' under the Central Excise Act for the period prior to April 29, 2010. The Tribunal emphasized that the term 'automobile' was not defined in the Central Excise Act or the Tariff Act, and thus relied on dictionary definitions and common parlance, rather than definitions from other statutes like the Motor Vehicles Act or the Air Act.Key Evidence and FindingsThe Tribunal noted that the appellants had not paid central excise duty on the activities in question prior to the legal changes in May 2011, which they later complied with. It also acknowledged that the department had appropriated duties paid post-April 29, 2010, indicating no dispute for that period. The Tribunal relied heavily on the Larger Bench's interpretation that earthmoving equipment parts were not 'automobiles' under the excise framework prior to the 2010 amendment.Application of Law to FactsThe Tribunal applied the law by determining that the activities conducted by the appellants did not meet the statutory definition of 'manufacture' for the period before April 29, 2010, and thus were not subject to excise duty. The classification of parts as 'automobiles' was deemed prospective from the 2010 amendment, confirming no liability for the earlier period.Treatment of Competing ArgumentsThe Tribunal addressed the department's argument that the activities constituted manufacture by clarifying that the statutory amendments and definitions did not support this view for the period in question. It also dismissed the applicability of definitions from the Motor Vehicles Act and the Air Act, as these were not pertinent to the excise classification.ConclusionsThe Tribunal concluded that the adjudged demands for the period prior to April 29, 2010, were unsustainable. It found that the impugned order lacked legal basis and was therefore liable to be set aside.SIGNIFICANT HOLDINGSThe Tribunal preserved the Larger Bench's reasoning that definitions from other statutes should not influence the excise classification of 'automobiles.' It established the principle that amendments to the Third Schedule were prospective, impacting only post-April 29, 2010 activities.The final determination was that the impugned order was set aside, and the appeals were allowed in favor of the appellants, confirming no excise duty liability for the disputed period prior to April 29, 2010.