2017 (6) TMI 855 - AT - Central Excise

Classification of goods - body building for motor vehicles on chassis falling under CETH 8706 - N/N. 6/2006-CE and 12/2012-CE - Revenue entertained a view that the appellants are engaged only in building or fabricating bodies on the chassis and they do not manufacture motor vehicle but only bodies of motor vehicle - whether such goods cleared by the appellant are classifiable under Heading 8704 as motor vehicles for transport of goods or under Heading 8707 as bodies (including caps) for the motor vehicle of Headings 8701 to 8705 ? - Held that - the appellants were building bodies on the chassis classified under Heading 8706. Such activity is deemed to be manufacture of a motor vehicle in terms of the above chapter note. A plain reading of the chapter note alongwith the relevant tariff headings makes it clear that the product cleared by the appellant after body building activity is a manufactured motor vehicle. Considering the nature of motor vehicle, which is for transport of goods, the same has to be classified under Heading 8704 - the claim of refund under Rule 5 of CCR, 2004 in Automobile Corporation of Goa Ltd. vs. CCE, Goa 2011 (9) TMI 399 - CESTAT, MUMBAI held that the independent body builders are manufacturers of body on their own account and, hence, are to be considered as manufacturers of motor vehicle. CENVAT credit - availment of credit on inputs used by the appellants, appellant have reversed credit attributable to inputs used in manufacture of exempted goods - Held that - it is a settled position that reversal of credit amounts to non-availment - reliance placed in the case of Commissioner of Central Excise, Mumbai- I Versus M/s Bombay Dyeing & Mfg. Co. Ltd 2007 (8) TMI 2 - Supreme Court , where it was held that Reversal of Cenvat Credit would amount to non taking credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of goods under Central Excise Tariff Heading, eligibility for exemption under Notification 6/2006-CE and 12/2012-CE, correctness of credit reversal, limitation on demands and penalties, malafide intentions.

Detailed Analysis:

1. Classification of Goods:
The dispute revolved around the correct classification of goods cleared by the appellant and their eligibility for exemption under specific notifications. The appellants argued that the final product, a complete motor vehicle with body and chassis, should be classified under Central Excise Tariff Heading 8704 for motor vehicles for transport of goods. They relied on Chapter Note 5, which deems body building on a chassis as the manufacture of a motor vehicle, supporting their eligibility for exemption under the said notifications.

2. Eligibility for Exemption:
The appellants contended that they did not avail credit on duty paid chassis and duly reversed credit for inputs used in the manufacture of exempted goods. They argued that such reversal constituted non-availment of credit, citing various case laws to support their position. The issue of credit reversal was not part of the show cause notice, and the Original Authority's findings on this matter were challenged based on changed legal positions and lack of malafide intentions.

3. Judicial Interpretation and Precedents:
The Tribunal analyzed Chapter Note 5, which deems body building on a chassis as the manufacture of a motor vehicle, leading to classification under Heading 8704. The Tribunal distinguished previous decisions that did not consider the scope of Chapter Note 5 and emphasized the clear wording of the note in classifying the appellant as a manufacturer of a motor vehicle. Relevant case laws, such as Automobile Corporation of Goa Ltd. Vs. CCE and CCE, T.N. Vs. Vinayaga Body Building Industries Ltd., supported the classification of the final product as a motor vehicle under Heading 8704.

4. Credit Reversal and Legal Position:
The Tribunal acknowledged the appellant's reversal of credit attributable to inputs used in the manufacture of exempted goods as a valid non-availment of credit. Citing established legal principles and case laws like CCE, Mumbai Vs. Bombay Dyeing & Mfg. Co. Ltd., the Tribunal upheld the appellant's argument regarding the non-availment of credit through credit reversal.

5. Conclusion:
After thorough analysis and consideration of the arguments presented, the Tribunal found the impugned orders unsustainable and set them aside. The appeals were allowed, emphasizing the correct classification of the goods under Central Excise Tariff Heading 8704 and the appellant's compliance with the conditions for exemption under the relevant notifications. The decision was pronounced in the open court on 20/06/2017.