Motor vehicle parts exemption extends to intermediate components used in I.C. engines forming part of vehicle manufacture.

Parts used in the manufacture of I.C. engines, where those engines are themselves used in the manufacture of motor vehicles, were treated as covered by an exemption notification for parts and accessories of motor vehicles, provided the prescribed Chapter X procedure was satisfied. On that construction, intermediate components need not be confined to the final assembly stage if they form part of the manufacturing chain leading to motor vehicles. The denial of exemption was therefore unsustainable, and the assessee was granted the notification benefit with consequential relief.

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Issues: Whether parts of I.C. engines used in the manufacture of motor vehicles were entitled to exemption as parts of motor vehicles under the relevant exemption notification.

Analysis: The exemption covered parts and accessories of motor vehicles intended for use in the further manufacture of excisable goods, subject to the prescribed Chapter X procedure. The disputed parts were used in the manufacture of I.C. engines, and the I.C. engines were in turn used in the manufacture of motor vehicles. Following the earlier Tribunal view, parts used at an intermediate stage in such manufacture were treated as parts of motor vehicles for the purpose of the notification.

Conclusion: The exemption was available and the denial of benefit was unsustainable.

Final Conclusion: The appeal succeeded and the assessee was granted the benefit of the exemption notification with consequential relief.

Ratio Decidendi: Where intermediate parts are used in the manufacture of I.C. engines which are themselves used in the manufacture of motor vehicles, those parts can be regarded as covered by an exemption for parts of motor vehicles if the notification is otherwise satisfied.

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