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Issues involved: Whether persons building bodies of buses and trucks on customer-supplied chassis are considered manufacturers of motor vehicles u/s XVII, Chapter 87, Heading Nos. 87.02 and 87.04 of the Central Excise Tariff Act, 1985, and are liable for excise duty and licensing.
Judgment Summary: Issue 1: Liability for Excise Duty and Licensing The petitioners, small-scale units building bodies on customer-supplied chassis, were asked to pay excise duty of Rs. 4,000/- and Rs. 8,000/- per vehicle by the Central Excise authorities. The authorities argued that by building bodies on chassis, the petitioners were converting them into complete motor vehicles falling under Heading Nos. 87.02 and 87.04, thus liable for duty and licensing. However, the Court disagreed, stating that the petitioners were not equipped to manufacture motor vehicles and their activities did not amount to manufacturing complete vehicles. The Court emphasized that the bodies built by the petitioners were exempt from excise duty under Heading No. 87.07, as they did not manufacture motor vehicles but only bodies for them. Issue 2: Interpretation of Manufacturing Process The Court rejected the argument that building bodies on chassis transformed them into motor vehicles, highlighting that the petitioners did not engage in sophisticated manufacturing processes typical of motor vehicle manufacturers. It was noted that consumers do not associate the bodies built by petitioners with the need fulfilled by motor vehicles, and the petitioners did not hold themselves out as manufacturers of complete vehicles. The Court emphasized that the bodies built by the petitioners were distinct from complete motor vehicles and were exempt from excise duty under Heading No. 87.07. Conclusion The Court allowed the writ petitions, ruling that the petitioners, as small-scale body builders, were not manufacturing motor vehicles but only bodies for buses and trucks. Their turnover being below Rs. 10 lakhs, they were not liable to pay excise duty or obtain a license under the Act. The Court held that the bodies built by the petitioners were exempt from excise duty under Heading No. 87.07.
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