2024 (12) TMI 467 - AT - Central Excise

Process amounting to manufacture or not - activity of building body structures of buses on the chassis - to be classified under CETH 8707 of the Central Excise Tariff Act, 1985? - error in issuance of SCN - Availament of CENVAT Credit - Exemption under N/N. 12/2012-CE dated 17.03.2012 under Sr. No. 276. Error in issuance of SCN - HELD THAT - It is found that there is a serious error in the entire issuance of show cause notice as well as passing of adjudication order in as much as the show cause notice ignoring the chapter Note of chapter 87, the vehicle was proposed to be classified under chapter 8707, on top of that the adjudicating authority has travelled beyond the scope of show cause notice and classified the motor vehicle not only one particular chapter heading but under chapter heading 8703 or 8704. Therefore, firstly the adjudication order travels beyond the scope of show cause notice. Secondly, the adjudicating authority is also not confirmed that whether the motor vehicle will fall under chapter 8703 or 8704. Therefore, on this basis itself, the entire adjudication proceeding is vitiated. Classification of goods - HELD THAT - Chapter 8703 is in respect of the passenger vehicle having sitting capacity of not exceeding 10 persons and chapter heading 8704 is for the motor vehicle for transport of goods - In the present case the motor vehicle manufactured by the appellant is having sitting capacity of 41 passenger. Therefore, it is neither classifiable under 8703 nor 8704. On this basis itself demand is not sustainable - From the invoice in respect of purchase of chassis by the appellant s client, it is clear that the excise duty has been paid on the chassis. Availament of CENVAT Credit - Exemption under N/N. 12/2012-CE dated 17.03.2012 under Sr. No. 276 - HELD THAT - As regard the condition that Cenvat credit of such chassis is not availed by the manufacturer of motor vehicle, it is an admitted fact that appellant is neither registered with Central Excise nor paying any Excise Duty, Therefore there is no question of availment of Cenvat Credit either on the inputs or any other material used in the manufacture of such motor vehicle. With this fact, the conditions of the notification also stands scrupulously complied with. Therefore, the motor vehicle manufactured by the appellant is exempted under the aforesaid notification. Therefore, on this merit also the demand is not sustainable. Thus, the appellant are not liable to pay Excise duty on the motor vehicle manufactured by them on the chassis supplied by their client, who is other than the manufacturer of a chassis manufacture. Accordingly, the impugned orders are not sustainable. Hence the same are set aside - appeal allowed.

Summary

Issues: Classification of manufactured goods under Central Excise Tariff Act, 1985; Applicability of exemption notification; Imposition of penalty on proprietor of a proprietorship concern.

Classification of manufactured goods under Central Excise Tariff Act, 1985:
The case involved the classification of bus bodies manufactured by the appellant under the Central Excise Tariff Act, 1985. The investigating agency contended that the body building activity amounts to manufacture under Chapter 87. The show cause notice proposed the classification of motor vehicles under a specific chapter heading, which was disputed by the appellant. The appellate tribunal observed that the adjudication order incorrectly classified the vehicle under different chapter headings, thereby vitiating the entire proceeding. It was determined that the motor vehicle manufactured by the appellant, with a seating capacity of 41 passengers, did not fall under the chapters specified in the notice. The correct classification was identified as under chapter heading 8702, and the appellant was found eligible for exemption under a specific notification.

Applicability of exemption notification:
The appellant claimed exemption under Notification No. 12/2012-CE dated 17.03.2012, which covered motor vehicles designed for the transport of more than six persons. The tribunal analyzed the conditions of the notification, emphasizing that the chassis on which the motor vehicle is manufactured must be duty paid. It was noted that the appellant's compliance with the conditions of the notification, including the non-availment of Cenvat credit, rendered the motor vehicle exempt from excise duty. The tribunal concluded that the demand for excise duty was not sustainable based on the appellant's adherence to the notification's requirements.

Imposition of penalty on proprietor of a proprietorship concern:
The appellant contested the imposition of penalties on the proprietor of the proprietorship concern, citing legal precedents that disallowed separate penalties on proprietors in such cases. The tribunal referenced various judgments supporting the appellant's argument and held that in the case of a proprietorship concern, a separate penalty on the proprietor was not permissible. Consequently, the penalties imposed on the proprietor were deemed unsustainable, aligning with established legal principles.

In conclusion, the appellate tribunal set aside the impugned orders, allowing the appeals with consequential relief. The tribunal determined that the appellant was not liable to pay excise duty on the motor vehicles manufactured using chassis supplied by a third party. The decision highlighted the correct classification of the goods, the fulfillment of exemption notification conditions, and the inapplicability of penalties on the proprietor of a proprietorship concern.