2022 (5) TMI 476 - AT - Central Excise

Benefit of exemption - Misclassification of goods - Bulker mounted on chassis fitted with engine - classifiable under Chapter Heading 8704 or 8707 or 8716 or otherwise - eligibility of benefit of exemption as per the Notification No. 6/2006-CE dated 01.03.2006 by classifying their products under Chapter Heading No. 8704 or other otherwise - recovery of duty alongwith interest and penalty - HELD THAT - It is admitted fact that the appellant‟s customers supply duty paid chassis which are used for production of Bulker which is in the nature of fabricated tanker. The said Bulker specially designed for transport of fly ash which is mounted on duty paid chassis fitted with the engine received from the customers. It is found that the Appellant had classified the said goods under Chapter heading No. 8704 and also claimed the exemption benefits available as per the Notification No. 6/2006-CE dated 01.03.2006. From the Central Excise Tariff heading and chapter Note, it is found that Chapter heading 8704 covers the product Motor Vehicle for the transport of goods and Chapter heading 8716 covers a group of non-mechanically propelled vehicles. Chapter Note 5 to the Chapter 87 creates a fiction whereby building a body or fabrication or mounting or fitting of a structure or equipment on a chassis, falling under Heading 8706, shall amount to manufacture of a motor vehicle -. In terms of the legal fiction, since the appellant is mounting or fitting bulkers on the chassis falling under Chapter 8706, Appellant is deemed a manufacturer of motor vehicle and since the said vehicle is used for transportation of goods viz. fly Ash /cement etc, Appellant is a manufacturer motor vehicle falling under 8704. From the description of the articles and the use to which they put, it is found that heading 8704 is the most appropriate. The view taken by the Adjudicating authority that Bulkers mounted on chassis is classifiable under Chapter heading no. 8716 is incorrect. There is no dispute that after fabrication of bulkers appellant undertaking the process of mounting it on chassis and in the same form they were clearing it as complete and integrated motor vehicle for transport goods. Further Chapter heading 8716 would be applicable for fabrication of bodies for trailers /semi-tailers covered under Heading 8716 and these fabrication of bodies would be regarded as bodies for trailer /semi-trailer of Heading 8716 and such bodies would also be classified under Heading 8716.Thus it is quite clear that the disputed goods cannot be classifiable under Chapter Heading 8716. Serial No. 39 of the table annexed to Notification No. 6/2006 motor vehicles for the transport of goods falling under 8704 is exempt from excise duty subject to condition No. 9 which stipulates that the manufacturer does not avail of the Cenvat Credit of duty paid on chassis falling under 8706 or other inputs used in the manufacture of such vehicle - In the present case, it is not in dispute that the appellant has not availed any Cenvat Credit on any of the inputs which have been used in the manufacture of either the bulkers or the duty paid on the chassis and therefore, the appellant would be entitled for the benefit of exemption under the said Notification vide Serial No. 39. Therefore, there would not be any duty liability on the appellant on the bulkers manufactured and captively consumed in the manufacture of motor vehicle falling under Chapter 8704. Appeal allowed.

Summary

Issues Involved:
1. Classification of "Bulker mounted on Chassis" under Chapter Heading 8716 or 8704 of the Central Excise Tariff Act.
2. Classification of "Bulkers on horse" under Chapter Heading 8716 or 8704 of the Central Excise Tariff Act.
3. Demand and recovery of Central Excise Duty.
4. Imposition of interest under Section 11AC of the Central Excise Act, 1944.
5. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002.
6. Eligibility for exemption under Notification No. 6/2006-CE dated 01.03.2006.

Detailed Analysis:

1. Classification of "Bulker mounted on Chassis" and "Bulkers on horse":
The core issue was whether the goods, "Bulker mounted on Chassis" and "Bulkers on horse," should be classified under Chapter Heading 8716 or 8704 of the Central Excise Tariff Act. The appellant argued that the goods should be classified under Chapter Heading 8704 as motor vehicles for the transport of goods, which would make them eligible for exemption under Notification No. 6/2006-CE. The Commissioner (Appeals) had classified all goods under Chapter Heading 8716, which pertains to trailers and semi-trailers, thereby denying the exemption.

The Tribunal noted that Chapter Note 5 to Chapter 87 states that building a body or fabrication or mounting or fitting of structures or equipment on the chassis falling under Heading 8706 shall amount to "manufacture" of a motor vehicle. The Tribunal concluded that since the appellant was mounting or fitting bulkers on the chassis, they were deemed manufacturers of motor vehicles under Heading 8704. Consequently, the Tribunal found that the goods should be classified under Chapter Heading 8704, not 8716.

2. Demand and Recovery of Central Excise Duty:
The adjudicating authority had re-quantified the demand and confirmed a duty demand of Rs. 30,60,884/-, along with interest and penalties. The Tribunal, however, found that the classification under Heading 8704 was appropriate, and therefore, the demand for duty based on the classification under Heading 8716 was unsustainable.

3. Imposition of Interest and Penalties:
The Tribunal held that since the goods were correctly classifiable under Heading 8704 and the appellant was eligible for the exemption, the imposition of interest and penalties under Section 11AC of the Central Excise Act, 1944, and Rule 25 of the Central Excise Rules, 2002, was also unsustainable.

4. Eligibility for Exemption under Notification No. 6/2006-CE:
The Tribunal observed that the appellant had not availed any Cenvat Credit on the inputs used in the manufacture of bulkers or on the duty paid on the chassis. Therefore, the appellant was entitled to the exemption under Notification No. 6/2006-CE dated 01.03.2006, as motor vehicles for the transport of goods falling under Heading 8704 were exempt from excise duty subject to the condition that the manufacturer does not avail of the Cenvat Credit.

Conclusion:
The Tribunal found merit in the appeals filed by the appellant, holding the impugned order as unsustainable. The Tribunal set aside the order and allowed the appeal, classifying the goods under Chapter Heading 8704 and granting the exemption under Notification No. 6/2006-CE dated 01.03.2006.

Judgment:
The appeal is allowed, and the impugned order is set aside. The goods are classified under Chapter Heading 8704, and the appellant is entitled to the exemption under Notification No. 6/2006-CE dated 01.03.2006.