2016 (11) TMI 311 - AT - Central Excise

Charge differential Central Excise duty - amount received from vehicle manufacturers for undertaking rectification/upgradation / replacing of leaf springs in chassis, which were sent to them for body building - Held that - The chassis is manufactured by the motor-vehicle manufacturer along with the leaf springs for fabrication of body. The leaf springs cannot be identified as independent of chassis on which duty is paid as manufactured item, by the manufacturer. Secondly, we find that Notification No. 3/2001-CE dated 01/03/2001 and 6/2002-CE dated 01/03/2002 specifically indicate, for discharge of concessional duty liability, shall be excluding the value of chassis used in such vehicle. Assuming even if the modification/replacement of the leaf spring is considered as a manufacturing activity, it would be manufacturing activity on the chassis and not on the body building activity. As per notification 3/2001 -CE and 6/2002-CE value of the chassis needs to be excluded, if it is so, there cannot be any demand on the said value/amount received by the appellant for modification / replacement of the leaf springs before fabricating the body on the said chassis. See Mukul Engineering Works v. Commissioner of Central Excise (2010 (3) TMI 605 - CESTAT, MUMBAI) wherein held that the chassis includes running gear, is already included in the value of the chassis when it was cleared for body building on payment of duty. In view of the foregoing, we hold that the impugned order is unsustainable and liable to be set aside and we do so.

Summary

Issues:
1. Whether the appellant is required to discharge differential Central Excise duty on the amount received for rectification/upgradation/replacement of leaf springs in chassis sent for body building.

Analysis:
The appeal was filed against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai Zone II. The main issue in consideration was whether the appellant should pay differential Central Excise duty on the amount received for modifying or replacing leaf springs in chassis sent for body building. The appellant is involved in body building on chassis and pays duty on the body built, availing benefits of specific notifications. The dispute arose when the appellant received consideration from vehicle manufacturers for modifying or replacing leaf springs to make the chassis suitable for body building. The Revenue wanted to tax this amount as part of chassis manufacture.

The first appellate authority concluded that modifying or replacing leaf springs is essential to make the chassis suitable for fitting the tipper body, thus constituting part of body manufacture. However, the Tribunal disagreed with this reasoning for multiple reasons. Firstly, the chassis and leaf springs are manufactured together by the vehicle manufacturer, making it difficult to separate them for duty payment. Secondly, specific notifications exclude the value of chassis for concessional duty liability, indicating that any manufacturing activity on the chassis should not attract additional duty. The Tribunal cited a previous judgment where the value of running gear was considered part of the chassis value cleared for body building, supporting the exclusion of additional duty for leaf spring modifications/replacements.

Ultimately, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal in favor of the appellant. The judgment highlighted the importance of specific notifications and previous rulings in determining the duty liability for activities related to chassis modification in the context of body building.

The judgment was delivered by the Appellate Tribunal CESTAT MUMBAI, with detailed analysis provided by Member (Judicial) and Member (Technical). The legal representatives for the appellant and respondent were mentioned, along with the specific Order-in-Appeal being contested. The decision to set aside the impugned order and allow the appeal was pronounced in court, providing a clear resolution to the dispute regarding differential Central Excise duty on leaf spring modifications/replacements in chassis sent for body building.