2006 (5) TMI 368 - AT - Central Excise

Summary

Issues:
Classification of goods under Heading 87.06 or 87.04 of the CETA Schedule, imposition of duty and penalty, interpretation of Chapter Notes.

Classification of Goods:
The judgment revolves around the classification of goods under Heading 87.06 or 87.04 of the CETA Schedule. The Commissioner of Central Excise demanded duty and imposed a penalty on the appellants for cabin-fitted chassis cleared to a specific company. The dispute primarily concerns the classification of the item, with the authority basing its decision on Chapter Notes 4 and 3 to Chapter 87 of the Schedule. The appellants argued for classification under Heading 87.04, contending that fitting a driver's cabin on the chassis constitutes "manufacture" of a motor vehicle for transport of goods. However, the tribunal found that a complete motor vehicle did not take shape in this case, leading to the rejection of the appellants' claim. The decision relied on Chapter Note explanations without reference to the definition of "manufacture" in Chapter 87. The judgment also distinguished a previous case involving a motor vehicle resulting from body-building on chassis, which did not align with the present scenario. Despite no plea of financial hardships, a lenient approach was adopted.

Imposition of Duty and Penalty:
The Commissioner demanded duty of Rs. 1.14 crores and imposed a penalty of Rs. 15 lakhs on the appellants for the period between October 2003 to June 2005. The quantification of duty was based on the price declared by the assessee, with the authority accepting this price for calculation purposes. The penalty amount was significant, prompting the tribunal to direct the appellants to pre-deposit Rs. 10,00,000 within four weeks as per Section 35F of the Central Excise Act, 1944. Compliance with this pre-deposit would result in a waiver and stay of recovery concerning the penalty and the remaining duty amount.

Interpretation of Chapter Notes:
The interpretation of Chapter Notes played a crucial role in the judgment. The text of Chapter Notes 4 and 3 to Chapter 87 remained consistent throughout the disputed period. These notes defined the scope of classification under Heading 87.06 and 87.04, emphasizing the inclusion of chassis with or without a cab and the activities amounting to "manufacture" of a motor vehicle. The tribunal scrutinized these notes, particularly focusing on the absence of a specific mention of a "cab" in the definition provided, which influenced the decision regarding the classification of the goods. The judgment highlighted the importance of aligning the activities conducted by the assessee with the definitions and provisions outlined in the Chapter Notes to determine the appropriate classification under the CETA Schedule.