Motor vehicle parts exemption extends through excisable engine manufacture when the parts remain used in vehicle production.

Unspecified motor vehicle parts brought under Chapter X procedure were treated as eligible for exemption under Notification No. 167/79-C.E. when they were used in the manufacture of internal combustion engines that were themselves excisable goods and were ultimately employed as original equipment in motor vehicles. The notification was read to cover parts and accessories of motor vehicles intended for further manufacture, and the post-1979 tariff classification did not defeat that treatment merely because the parts fell under Item 68. Because the prescribed procedure was followed and the engines were used in motor vehicle production, denial of exemption was not justified and the duty demand and penalty could not stand.

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Issues: Whether unspecified parts of motor vehicles, brought under Chapter X procedure and used in the manufacture of internal combustion engines for motor vehicles, were entitled to exemption under Notification No. 167/79-C.E. when such IC engines were excisable goods and the parts were ultimately used as original equipment in motor vehicles.

Analysis: The notification exempted parts and accessories of motor vehicles falling under Item No. 34A of the Tariff when intended for use in the further manufacture of excisable goods, subject to the prescribed conditions. After the 1979 tariff changes, unspecified motor vehicle parts fell under Item No. 68. The IC engines manufactured by the appellant were themselves excisable goods under Item No. 29 and were used in motor vehicles. The reasoning accepted that parts used in IC engines for motor vehicles retained their character as motor vehicle parts for the purpose of the exemption. Since the goods were received under the prescribed procedure and the engines were used in motor vehicle manufacture, denial of the exemption to the unspecified parts was not justified.

Conclusion: The exemption under Notification No. 167/79-C.E. was available to the unspecified motor vehicle parts used in the manufacture of IC engines for motor vehicles, and the duty demand and penalty could not stand.

Ratio Decidendi: Where motor vehicle parts are used in the manufacture of excisable goods that are themselves employed in motor vehicle production, the exemption for motor vehicle parts intended for further manufacture cannot be denied merely because the parts are incorporated through an intermediate excisable product.

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