2007 (11) TMI 207 - AT - Central Excise

Comm (A) confirmed cess interest & penalty on vehicles which were body built by appellant - In terms of the circular 41/88 it is clear that the cess is not to be levied or the chassis built by independent body builder as cess has already been paid on the chassis by manufacturer - clarification of the above circular has not been applied by the Commissioner and therefore the confirmation of cess in the present case is not correct and the same is required to be set-aside including the penalty

Summary

Issues:
1. Applicability of cess on vehicles body built by the appellants.
2. Interpretation of Industrial Development and Regulation Act, 1951.
3. Consideration of exemption notifications 4/97 and 89/95.
4. Validity of penalty under Rule 173Q of CE Rules, 1944.

Analysis:
1. The appellant contested OIO No. 18/05 confirming cess on vehicles body built by them, along with duty on metallic and aluminum scrap. They argued that cess is not applicable as per Industrial Development and Regulation Act, 1951. Referring to exemption Notifications 4/97 and 89/95, they claimed denial of exemption. The Board's Circular No. 41/88 clarified that cess is not required from body builders, but from chassis manufacturers. The Tribunal found merit in the appellant's argument, citing the circular's directive that cess need not be levied on chassis built by independent body builders if already paid. Consequently, the confirmation of cess and penalty was set aside.

2. The Tribunal examined the provisions of the Industrial Development and Regulation Act, 1951, under which the cess was levied. The Act limits the cess rate to two annas per cent of the goods' value, conflicting with the Excise Tariff Act, 1985's higher rate. Relying on the Act and Circular No. 41/88, the Tribunal concluded that the cess should not be imposed on body builders if already paid on chassis. This interpretation aligned with the Act's provisions, supporting the appellant's position.

3. The appellants' reliance on exemption Notifications 4/97 and 89/95 was crucial in challenging the cess imposition. Despite denial of these exemptions, the Tribunal's decision favored the appellants based on the Circular's clear directive. By emphasizing the Circular's guidance over the notifications, the Tribunal invalidated the cess confirmation, highlighting the importance of proper application of relevant circulars in such cases.

4. Regarding the penalty imposed under Rule 173Q of CE Rules, 1944, the Tribunal's decision to set aside the confirmation of cess and penalty indicates a comprehensive relief granted to the appellants. By allowing the appeal and providing consequential relief, the Tribunal rectified the erroneous imposition of cess and penalty, ensuring justice and adherence to legal provisions.

This detailed analysis of the judgment showcases the Tribunal's thorough consideration of legal provisions, circular directives, and exemption notifications to deliver a just and well-founded decision in favor of the appellants.