Deeming fiction under Chapter 87 treats body building on a chassis as motor vehicle manufacture under the excise tariff.

Note 3 to Chapter 87 of the Central Excise Tariff Act creates a deeming fiction under which body building, fabrication, or mounting of structures or equipment on a chassis is treated as manufacture of a motor vehicle for Headings 87.01 to 87.05. The earlier Supreme Court ruling in Ram Body Builders was considered to relate to the pre-amendment tariff and not to the effect of this later statutory note. The Tribunal also disagreed with the contrary view in Kamal Auto Industries and observed that the amended chapter note required reconsideration of the classification question, leading to reference of the matter to a Larger Bench.

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Issues: Whether, in view of Note 3 to Chapter 87 of the First Schedule to the Central Excise Tariff Act, 1985, the activity of body building, fabrication, or mounting of structures or equipment on a chassis amounts to manufacture of a motor vehicle under Headings 87.01 to 87.05; and whether the earlier Supreme Court decision in Ram Body Builders continued to govern classification after insertion of the said Note.

Analysis: The Tribunal held that the later insertion of Note 3 created a deeming fiction that treated body building on a chassis as manufacture of a motor vehicle for the specified headings. It reasoned that the earlier decision in Ram Body Builders had been rendered in the context of the tariff before the introduction of this deeming provision and therefore did not address the effect of the amended statutory note. The Tribunal also disagreed with the contrary view previously taken in Kamal Auto Industries and noted that the legal position required reconsideration in light of the amended chapter note.

Conclusion: The Tribunal concluded that Note 3 changes the legal position and that the activity of body building on chassis is to be treated as manufacture of a motor vehicle under Headings 87.01 to 87.05; however, because a different view had been taken by another Bench, the matter was referred for consideration by a Larger Bench.

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