1997 (2) TMI 229 - SC - Central Excise

Whether tyres of the size 1800 and above manufactured for fitment to heavy moving vehicles such as dumpers and earth movers are exigible to excise duty as tyres for motor vehicles ? Held that - Tyres of the size 1800 and above would fall within the residuary sub-item III in Item No. 16 of the Central Excise Tariff during the relevant period. Accordingly we set aside the impugned orders of the Central Government passed in revision. However, the question of entitlement to refund shall be decided by the Assistant Collector concerned in accordance with the law laid down by the Constitution Bench of this Court in Mafatlal Industries Ltd. v. Union of India 1996 (12) TMI 50 - SUPREME COURT OF INDIA and the FORMAT prepared pursuant to the directions given therein.

Summary

Issues:
Classification of tyres for heavy moving vehicles under excise duty as "tyres for motor vehicles."

Analysis:
The appeal in question pertains to the classification of tyres of size 1800 and above manufactured for heavy moving vehicles like dumpers and earth movers under excise duty as "tyres for motor vehicles." The Central Government, exercising revisional powers under the Central Excises and Salt Act, held that such tyres fall under the category of "tyres for motor vehicles" as per Item No. 16 of the Central Tariff. The appellant contended that these tyres should be classified under the residuary sub-item 3 as "all other tyres." The dispute arose when excise duty was collected from the appellant for these tyres as "tyres for motor vehicles," leading to claims for refund which were initially rejected by the Assistant Collector but later reversed by the Appellate Collector. However, the Central Government set aside the Appellate Collector's orders, prompting this appeal.

The crux of the issue lies in determining whether heavy moving vehicles like dumpers can be considered "motor vehicles" for the purpose of excise duty on tyres. The appellant argued that "motor vehicles" should be interpreted as vehicles meant to run on roads, excluding vehicles like dumpers primarily used off-road. Conversely, the Revenue contended that since dumpers can also operate on roads, they qualify as "motor vehicles." The absence of a specific definition of "motor vehicle" in the Act or Item No. 16 led to a reliance on the definition provided in Item No. 34 of the Central Tariff, which includes mechanically propelled vehicles adapted for road use.

The interpretation of the term "motor vehicle" from Item No. 34 was crucial in this case. The Explanation in Item No. 34 clarified that when a motor vehicle is fitted with specialized equipment like weight lifting or earth moving tools, such equipment should not alter the classification of the vehicle as a motor vehicle. The Court referred to a previous judgment that linked the inclusion of "agricultural tractors" in Item No. 34 to the definition of "motor vehicle," but highlighted that subsequent additions to the item did not significantly impact the interpretation. The focus remained on whether the vehicles were adapted for road use, emphasizing the principal or dominant purpose of road usage.

The Court delved into the meaning of "adapted" in the context of vehicles being considered "motor vehicles." Citing legal precedents, the Court emphasized that the term should be understood in conjunction with the surrounding context and the primary use of the vehicle. Ultimately, the Court concluded that tyres of size 1800 and above for heavy moving vehicles should be classified under the residuary sub-item III in Item No. 16, not as "tyres for motor vehicles." The decision set aside the Central Government's revisional orders, directing the Assistant Collector to decide on the refund claims following established legal principles outlined in prior judgments.