Specific tariff heading prevails for motor vehicle bodies, and SSI exemption follows under the applicable notification.

Bodies built on duty-paid chassis were classifiable under Heading 87.07 rather than under Headings 87.01 to 87.05, because Chapter Note 3 of Chapter 87 deems body building to be manufacture only for the latter headings and does not displace the specific heading for motor vehicle bodies. The specific tariff entry therefore prevailed over the broader headings relied on by the Revenue. Once classification under Heading 87.07 was accepted, the exemption under Notification No. 175/86-C.E. as an SSI unit also applied, since the denial of exemption had no independent basis.

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Issues: (i) Whether bodies built on duty-paid chassis were classifiable under Chapter Heading 87.07 or under Chapter Headings 87.01 to 87.05 in view of Chapter Note 3 of Chapter 87. (ii) Whether the appellants were entitled to the benefit of Notification No. 175/86-C.E. as an SSI unit.

Issue (i): Whether bodies built on duty-paid chassis were classifiable under Chapter Heading 87.07 or under Chapter Headings 87.01 to 87.05 in view of Chapter Note 3 of Chapter 87.

Analysis: Chapter Note 3 deems body building on a chassis to be manufacture only for the purpose of Headings 87.01 to 87.05. The note does not apply to bodies built on chassis which are separately covered by Heading 87.07. The specific heading for bodies of motor vehicles prevails over the more general headings relied on by the Revenue, and the introduction of the note did not alter the classification position for the goods manufactured by the appellants.

Conclusion: The bodies built on chassis were classifiable under Chapter Heading 87.07 and not under Chapter Headings 87.01 to 87.05.

Issue (ii): Whether the appellants were entitled to the benefit of Notification No. 175/86-C.E. as an SSI unit.

Analysis: The exemption notification applied to goods falling under Heading 87.07. Once the goods were held classifiable under that heading, the basis for denial of the exemption no longer survived.

Conclusion: The appellants were entitled to the benefit of Notification No. 175/86-C.E.

Final Conclusion: The assessee succeeded on classification and exemption, while the Department's appeals failed.

Ratio Decidendi: Where a tariff item provides a specific heading for the goods, that specific entry governs classification, and a chapter note deeming an activity to be manufacture for certain headings does not displace a distinct specific heading covering the same goods.

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