2016 (9) TMI 574 - AT - Central Excise

Whether the appellant being job worker i.e. manufacturer of body building is required pay automobile cess or not as per Automobile Cess Rules, 1984 read with industries (Development and Regulation) Act, 1951 or not - Held that - on introducing the Circular No. 41/88 dated 31st August, 1988 by CBEC, the matter of levy of automobile cess was referred to Administrative Ministry i.e. Ministry of Industries and as intimated the intention behind the notification levying the cess is to realize from the vehicle manufacturers and not from the body builders. Further, as per IDR Act, 1951, the notification for levying of cess has been issued, which provides that the rate of cess shall not, in any cess, exceeds to two percent of the value of the goods i.e. 1/8th per cent of the value of vehicle. It was also clarified that the cess may continue to be levied and collected in the condition they are cleared from the premises of the manufacturers and no cess should be levied again in case the body on the chassis is built by an independent body builder on the cess paid chassis. Therefore, there was no intention of the Administrative Ministry to levy cess on the activity of the body building. In that case, although the appellant may be the manufacturer in the light of the Chapter Note 5 of the Chapter 87 of the Central Excise Act, 1985, the automobile cess cannot be levied or collected from the appellant. Therefore, the arguments advanced by the Revenue are not acceptable as the said clarification issued by the Ministry of Industries has not been withdrawn till date. In that situation, the decision of the Tribunal in the case of Tata Motors Ltd. vs. CCE, Pune-III 2015 (1) TMI 1082 - CESTAT MUMBAI is squarely applicable to the facts of this case. - Decided in favour of appellant

Summary

Issues:
- Demand of education cess and penalty imposition on the Appellant for manufacturing buses/fabricating bus bodies on duty paid chassis.
- Interpretation of Chapter Note 5 of Chapter 87 in the Central Excise Tariff Act, 1985 regarding automobile cess payment.
- Applicability of CBEC Circular No. 41/88 dated 31.08.1988 in the context of automobile cess levy on body building activity.
- Whether the Appellant, as a job worker, is required to pay automobile cess as per the Automobile Cess Rules, 1984 and Industries (Development and Regulation) Act, 1951.

Analysis:

1. The Appellant, engaged in bus manufacturing and body fabrication, had initially paid automobile cess but stopped following the chassis suppliers' payment of the cess on the chassis. The Revenue demanded automobile cess post the introduction of Chapter Note 5 of Chapter 87, considering body building as manufacturing. The Commissioner (Appeals) upheld the demand and imposed penalties, leading to the appeal.

2. The Appellant argued citing precedents that the issue was settled, relying on Tata Motors Ltd. vs. CCE, Pune-III and their own case. The Respondent contended that Chapter Note 5 of Chapter 87 made the Appellant liable for automobile cess, disregarding the earlier circular and emphasizing the definition of "manufacture" from the Central Excise Act, 1944.

3. The Tribunal deliberated on the applicability of CBEC Circular No. 41/88 dated 31.08.1988, clarifying that cess should not be levied again if paid on the chassis by an independent body builder. The Ministry of Industries' intention was to collect cess from vehicle manufacturers, not body builders, as per the IDR Act, 1951, ensuring no double taxation on body building post-chassis cess payment.

4. Considering the circular and precedents, the Tribunal ruled that the Appellant, as a body builder on cess-paid chassis, was not liable for automobile cess. Upholding the Tribunal's decision in Tata Motors Ltd., the demand for automobile cess and penalties were set aside, providing consequential relief to the Appellant.