2006 (12) TMI 311 - AT - Central Excise

Issues:
1. Claim of exemption under Notification 162/83 for fitting FRP body on a motor vehicle received from the manufacturer.
2. Interpretation of Chapter Note 3 of Chapter 87 regarding the manufacture of a motor vehicle.
3. Availability of exemption under Notification 162/86 based on the nature of the received goods.
4. Financial hardship plea by the appellant and the direction for depositing a sum towards duty.

Issue 1 - Claim of Exemption under Notification 162/83:
The case involved the appellants receiving motor vehicles from the manufacturer and fitting FRP bodies after removing the canopy. They claimed exemption under Notification 162/83, which exempts vehicles manufactured on a duty paid chassis without taking credit of duty paid on such chassis. However, a show cause notice was issued demanding duty, arguing that the exemption was not applicable as what the appellants received was a motor vehicle, not a duty paid chassis. The Tribunal found the wording of the notification clear, exempting motor vehicles manufactured from duty paid chassis without credit. Since what the appellants received was a motor vehicle, not a chassis, the exemption was not available to them.

Issue 2 - Interpretation of Chapter Note 3 of Chapter 87:
The Advocate for the appellants referred to Chapter Note 3 of Chapter 87, stating that building a body or fitting structures on the chassis amounts to the manufacture of a motor vehicle. The appellants argued that by removing the canopy and fitting an FRP body on the chassis, they were essentially manufacturing a motor vehicle. However, the Tribunal noted that bodies are separately classified under Chapter Heading 8707, and Chapter Note 3 did not support the appellants' claim. The Tribunal concluded that what the appellants received was a motor vehicle, not a chassis, and thus, the exemption under the notification did not apply.

Issue 3 - Availability of Exemption under Notification 162/86:
Considering the nature of the goods received by the appellants, the Tribunal found that the exemption provided under Notification 162/86 was not available to them. While the appellants argued that they manufactured a motor vehicle and not just a body, the Tribunal emphasized that the exemption was specific to vehicles manufactured from duty paid chassis without taking credit. As the appellants received a motor vehicle, the conditions of the notification were not met, leading to the denial of the exemption.

Issue 4 - Financial Hardship and Direction for Deposit:
Although the Tribunal did not find a prima facie case in favor of the appellants, it acknowledged the unit's closure and the financial hardship claimed. Taking this into account, the Tribunal directed the appellants to deposit a sum of Rs. 5 lakhs towards duty within 8 weeks. Upon this payment, there would be a waiver from pre-deposit of the balance duty and penalty, with the recovery stayed until the appeal's disposal. The appellants were required to report compliance by a specified date.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal regarding the claim of exemption, interpretation of relevant legal provisions, and considerations for financial hardship in the decision-making process.

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