2022 (9) TMI 5 - AT - Central Excise

Classification of goods - Tipper Trucks/ Vehicles - Benefit of exemption from duty - to be classified under CSH 87042120, 87042290 and 87059000 or not - fabricated to be classified under sub-heading 87071000 or not - vehicle - to be covered under heading No.8703 or not - other vehicles - to be covered under heading No.87079000 or not - applicability of N/N. 6/2006-CE dated. 1.3.2006 - HELD THAT - In the present case it is observed that the show cause notice was issued to the appellant on the basis of certain physical examination of manufacturing process undertaken by the revenue authorities. Commissioner has found that the report received from the division office was not in accordance with the allegation made, based on physical examination of manufacturing process. It is also observed show cause notice also do not rely on any report prepared for such physical examination and make it a relied upon document for issuance of the show cause notice. So to clarify on the basis of the show cause notice the clarification is sought from the from the concerned authorities as to existence of any such physical verification report. In absence of any such verification report of the manufacturing process at the time of issuance of the Show Cause Notice, the entire basis for the issue of show cause notice fails. The appeal can be disposed on this short point itself. Thus the findings recorded by the Commissioner on the basis of the subsequent report called during the adjudication proceedings and Chartered Engineer certificate cannot be disputed. In case of COMMISSIONER OF C. EX., PUNE-III VERSUS KAILASH AUTO BUILDERS LTD. 2010 (6) TMI 387 - CESTAT, MUMBAI , CESTAT held that 'Skip Loader , a specially designed garbage collection vehicle required by municipal local bodies, was classifiable under Heading 87.05 and eligible for benefit of exemption under Notification No. 162/86-CE dated 1.3.1986. In the present case we are concerned with the period after the insertion of the said chapter notes in the chapter 87 of the First Schedule to Central Excise Tariff Act, 1987 and as stated in the above circular the classification has to be determined as per the said chapter note and not by following the decisions as relied upon by the revenue while filing this appeal. Accordingly Commissioner has determined the classification of garbage compactors under chapter heading 8705 and found them to be eligible for benefit of exemption as special purpose vehicle under Notification No 6/2006-CE. The appeal filed by the revenue is dismissed.

Summary

Issues Involved:
1. Classification of tipper bodies manufactured and used captively.
2. Applicability of Central Excise duty on tipper bodies.
3. Eligibility for exemption under Notification No. 67/95-CE and Notification No. 6/2006-CE.
4. Interest and penalty under Central Excise Act, 1944.

Detailed Analysis:

1. Classification of Tipper Bodies:
The primary issue is the classification of tipper bodies manufactured by the respondent. The revenue argued that the tipper bodies should be classified under Chapter Heading (CH) 8707, which pertains to bodies for motor vehicles. The respondent contended that the tipper bodies, when mounted on chassis, do not exist as separate entities but as integrated parts of motor vehicles, classifiable under CH 8704 or 8705.

The Commissioner, after examining the manufacturing process and a Chartered Engineer's certificate, concluded that the tipper bodies are fabricated piece by piece on the chassis, making them inseparable from the motor vehicle. Thus, they cannot be classified under CH 8707. The Tribunal upheld this view, noting that the physical examination report, which was the basis for the show cause notice, was absent from the records.

2. Applicability of Central Excise Duty:
The revenue demanded Central Excise duty on the tipper bodies, arguing that they are distinct excisable goods. The Commissioner and the Tribunal found that the tipper bodies, being integrated with the chassis, do not exist as independent excisable goods. Therefore, the demand for Central Excise duty was not sustainable.

3. Eligibility for Exemption:
The respondent claimed exemptions under Notification No. 67/95-CE and Notification No. 6/2006-CE. The Commissioner observed that the tipper bodies and garbage compactors are inseparable from the chassis and thus qualify as motor vehicles. The Tribunal upheld that the garbage compactors are special purpose vehicles under CH 8705 and are exempt under Notification No. 6/2006-CE.

For the tipper bodies, the Tribunal agreed with the Commissioner that they are classifiable under CH 8704 and are exempt under Notification No. 6/2006-CE. The Tribunal also referenced past decisions, including the Supreme Court's affirmation in Indian Hydraulic Industries and CESTAT's decision in Kailash Auto Builders, which supported the respondent's classification and exemption claims.

4. Interest and Penalty:
The Tribunal found that since the main demand for Central Excise duty was not sustainable, the associated interest and penalty under Sections 11A and 11AB of the Central Excise Act, 1944, were also not applicable.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the Commissioner's order that the tipper bodies and garbage compactors are not independently excisable and are correctly classified as motor vehicles, qualifying for exemptions under the relevant notifications. The Tribunal emphasized the absence of a physical examination report, which undermined the basis of the show cause notice, and relied on consistent past rulings to support its decision.