2015 (10) TMI 371 - AT - Central Excise

Manufacture - SSI exemption - customization of the already built up motor vehicle - body building - exemption under Notification No. 3/2001 denied on the ground that the assessee availed the Cenvat credit of the input which is in violation of condition of said notification. - Held that - They are doing cosmetic changes as per the requirement of the customer inside and outside of the vehicle. In our considered view these activity do not amount to manufacture for the reason that the original duty paid motor vehicles remained as motor vehicles only, except some changes and due to these changes original identity of the product in terms of Central Excise provisions does not change As per the fact of the present case it is undisputed that in the activity of customization of the car, the respondent has only made partial changes in the completely built up vehicle therefore they have neither fabricated any body/equipment nor mounted the same on chassis. Therefore the activity of customization carried out by the respondent does not fall under the four corners of chapter note 3. - Decided in favor of assessee. As regard the dropping of the demand on account of alleged removal of add on kits and parts and shortage found in the physical stock verification in Powai and Silvassa units, we find that there are serious conflicts between the allegation made in the show cause notices and Commissioner s findings in the impugned orders. The Ld. Counsel also made submissions that due to claim of SSI Exemption demand is not sustainable and also it is time bar. We therefore find that as regard demand of excise duty on alleged removal of add on kits and parts from Powai and Silvassa units needs re-consideration. - matter remanded back on this matter. Determination of turnover for the purpose of SSI exemption - extended period of limitation - Matter remanded back for reconsideration.

Issues Involved:
1. Customization of motor vehicles as manufacture.
2. Removal of add-on kits and parts without payment of duty.
3. Eligibility for SSI Exemption Notification No. 8/2001-CE.
4. Personal penalty imposed on Shri B.D. Bajaj.

Detailed Analysis:

1. Customization of Motor Vehicles as Manufacture:
The Tribunal examined whether the customization of motor vehicles by the respondent amounted to manufacture under Section 2(f) of the Central Excise Act, 1944, and Chapter Note 3 of Chapter 87 of the Central Excise Tariff. The respondent's activity involved cosmetic changes to duty-paid cars, which did not alter the original identity of the vehicles. The Tribunal concluded that these activities did not amount to manufacture, as the original motor vehicles remained unchanged in their fundamental identity. The Tribunal upheld the Commissioner's decision that customization did not fall under Chapter Note 3, which pertains to the fabrication of a new body and mounting it on a chassis.

2. Removal of Add-On Kits and Parts Without Payment of Duty:
The Tribunal noted conflicts between the show cause notices and the Commissioner's findings regarding the alleged removal of add-on kits and parts from the Powai and Silvassa units. The Commissioner had dropped the demand, considering the revenue neutrality and proper accounting by the Silvassa unit. However, the Tribunal found that the matter required reconsideration due to serious conflicts and remanded this issue to the Original Adjudicating Authority for a fresh order, considering all facts and representations, including the issue of time-bar.

3. Eligibility for SSI Exemption Notification No. 8/2001-CE:
The Tribunal observed that the Commissioner had made an error in computing the aggregate value of clearances for the year 2000-01 by not including the value of Rs. 1,03,04,873 towards the clearance of buses/tempo travellers. This error led to the incorrect extension of SSI exemption for the year 2001-02. The Tribunal directed the adjudicating authority to reconsider the demand related to SSI exemption, focusing on the limitation aspect and ensuring the correct computation of aggregate clearances. The Tribunal also agreed that any confirmed demand should be computed after deducting excise duty from the cum-duty value.

4. Personal Penalty Imposed on Shri B.D. Bajaj:
The Tribunal found that the Commissioner had incorrectly imposed a penalty of Rs. 5,000 each in OIO Nos. 26/2003 and 27/2003, whereas the minimum penalty under Rule 209A of the Central Excise Rules, 1944, and Rule 26 of the Central Excise Rules, 2001, is Rs. 10,000. The Tribunal held that the penalty should be increased to Rs. 10,000 in each order.

Conclusion:
The Tribunal upheld the setting aside of the demand related to the customization of motor vehicles as held by the Commissioner in OIO No. 25/2003. However, it remanded the matters related to OIO Nos. 26/2003 and 27/2003 (except the demand of Rs. 16,48,780, which was decided by the Bombay High Court) for reconsideration by the adjudicating authority. The adjudicating authority is expected to complete the de novo adjudication within three months, following the principles of natural justice. The appeals were disposed of by way of remand.

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