2025 (3) TMI 566 - AT - Central Excise

Process amounting to manufacture or not - packing repacking and labeling of spare parts of earthmoving equipment by the respondents-assessee - earthmoving equipment and their parts can be classified as automobiles under the Central Excise Tariff Act for the purpose of levying excise duty or not - HELD THAT - The issue involved in this appeal was decided by the Larger Bench of the Tribunal in M/S. ACTION CONSTRUCTION EQUIPMENT LTD 2023 (6) TMI 1320 - CESTAT MUMBAI (LB) where it was held that As the word automobile has not been defined in the Central Excise Act the Central Excise Tariff Act or the Notifications issued by the Central Government it would be permissible to refer to the dictionaries to find out the general sense in which the word is understood in common parlance and it will not be appropriate to refer to the definition of the word automobile occurring in the Air (Prevention and Control of Pollution) Act 1981 or the Motor Vehicles Act 1988 . On careful reading of the decision given by the Larger Bench of the Tribunal on the disputed issues it is found that the amendment carried out w.e.f. 29.04.2010 makes it abundantly clear that a legislature did not intend to tax the parts components and assemblies of earthmoving equipment etc. under the Head Automobiles ; therefore to this extent the adjudged demands for the period prior to 29.04.2010 cannot be sustained. It is further noted that the respondents-assessee have paid Central Excise duty for the period post 29.04.2010 and such duties paid have also been appropriated by the Department vide Order-in-Original dated 13.07.2012. Thus there is no dispute in this regard for the period post 29.04.2010 which is required to be examined in this case. The adjudged demands for the period prior to 29.04.2010 is not sustainable. Conclusion - The respondents-assessee s activities did not constitute manufacture prior to 29.04.2010 and earthmoving equipment parts were not automobiles under the Central Excise Tariff Act. The appeal filed by the appellants-department is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the activities of packing, repacking, and labeling of spare parts of earthmoving equipment by the respondents-assessee constitute "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944.

2. Whether the earthmoving equipment and their parts can be classified as "automobiles" under the Central Excise Tariff Act for the purpose of levying excise duty.

3. Whether the amendment to the Third Schedule of the Central Excise Tariff Act by the Finance Act, 2011, effective from 29.04.2010, is prospective or retrospective in nature.

ISSUE-WISE DETAILED ANALYSIS

1. Activities Constituting "Manufacture"

- Legal Framework and Precedents: The definition of "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944, includes any process which is specified in relation to any goods in the Third Schedule to the Act as amounting to manufacture.

- Court's Interpretation and Reasoning: The Tribunal examined whether the activities of packing, repacking, and labeling spare parts amounted to "manufacture." The Tribunal relied on the interpretation of the relevant statutory provisions and the Third Schedule to determine the scope of "manufacture."

- Application of Law to Facts: The Tribunal found that the activities carried out by the respondents-assessee did not amount to "manufacture" prior to the amendment effective from 29.04.2010, as the parts were not classified as "automobiles" under the relevant schedules before this date.

- Treatment of Competing Arguments: The Tribunal considered the department's argument that such activities should be considered as manufacture but concluded that the statutory framework did not support this interpretation for the period prior to the amendment.

- Conclusions: The Tribunal concluded that the activities did not constitute "manufacture" under the Central Excise Act for the period before the amendment.

2. Classification of Earthmoving Equipment as "Automobiles"

- Legal Framework and Precedents: The classification of goods under the Central Excise Tariff Act is crucial for determining the applicable excise duty. The term "automobile" was not defined in the relevant excise legislation.

- Court's Interpretation and Reasoning: The Tribunal referred to dictionary definitions and common parlance to interpret the term "automobile," rejecting definitions from other statutes like the Motor Vehicles Act and the Air (Prevention and Control of Pollution) Act.

- Key Evidence and Findings: The Tribunal noted that earthmoving equipment did not fit within the common understanding of "automobiles," which are generally vehicles for transporting passengers or goods on roads.

- Application of Law to Facts: The Tribunal applied the common parlance test to conclude that earthmoving equipment and their parts were not "automobiles" for excise purposes.

- Treatment of Competing Arguments: The Tribunal addressed the department's argument that earthmoving equipment should be classified as automobiles due to their self-propelled nature and registration under the Motor Vehicles Act but found these arguments unconvincing for excise classification.

- Conclusions: The Tribunal held that earthmoving equipment and their parts are not classified as "automobiles" under the Central Excise Tariff Act.

3. Prospective Nature of the Amendment

- Legal Framework and Precedents: The amendment to the Third Schedule by the Finance Act, 2011, added serial no. 100A, affecting the classification of parts and components.

- Court's Interpretation and Reasoning: The Tribunal determined that the amendment was prospective, applying only from 29.04.2010 onwards, based on the language of the amendment and related circulars.

- Key Evidence and Findings: The Tribunal noted that the amendment's language and the Ministry of Finance's clarification supported a prospective application.

- Application of Law to Facts: The Tribunal found that excise duty could not be levied on the respondents-assessee's activities for the period prior to the amendment's effective date.

- Treatment of Competing Arguments: The Tribunal considered the department's position but found that the statutory language clearly indicated a prospective application.

- Conclusions: The Tribunal concluded that the amendment was prospective, and demands for the period before 29.04.2010 were unsustainable.

SIGNIFICANT HOLDINGS

- Core Principles Established: The Tribunal established that in the absence of a statutory definition, common parlance should guide the classification of goods for excise purposes. It also affirmed that statutory amendments are generally prospective unless explicitly stated otherwise.

- Final Determinations on Each Issue: The Tribunal dismissed the department's appeal, holding that the respondents-assessee's activities did not constitute manufacture prior to 29.04.2010, and earthmoving equipment parts were not "automobiles" under the Central Excise Tariff Act.

- Verbatim Quotes of Crucial Legal Reasoning: "Automobiles, therefore, are conveyances for transportation of passengers and goods on road as also been understood by the department in the various Circulars issued from time to time. Serial no. 100A inserted in the Third Schedule w.e.f. 29.04.2010 is prospective..."