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Issues involved: Determination of liability to pay excise duty on motor vehicles manufactured by a company under the Central Excises and Salt Act, 1944.
Summary: The judgment by the Patna High Court (Ranchi Bench) involved a case where Tata Engineering and Locomotive Company Limited (TELCO), a licensee under the Central Excises and Salt Act, 1944, was manufacturing motor vehicles (chassis) and sending them to independent body builders for body building as per customers' requirements. The Excise Department raised an objection regarding the payment of excise duty on the body built on the chassis, leading to a demand-cum-notice to show cause. TELCO contended that it was not engaged in body building activities and challenged the notice and assessment order. The main issue for consideration was whether TELCO was liable to pay duty on the chassis alone or on the chassis plus the body built on it, determining whether TELCO could be considered the manufacturer of the body. The court examined the arrangement between TELCO and the body builders, where the body builders manufactured bodies according to TELCO's specifications, with TELCO having control over the quality and the right to reject non-compliant bodies. TELCO recovered the body price from customers, charging more than it paid to the body builders. The court found that TELCO did not manufacture the body but had control over the fabrication process to ensure compliance with customer specifications. Citing a Supreme Court decision, the court held that TELCO could not be considered the manufacturer of the body. The court rejected the arguments that TELCO was a manufacturer based on previous cases cited, concluding that TELCO was not liable to pay duty on the body built on the chassis. In the final decision, the court allowed the writ petition, quashing the notice and assessment order, and directed the respondents to pay a cost of Rs. 1,000 to TELCO.
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