2009 (11) TMI 487 - AT - Central Excise

Motor-vehicles - Testing agency required to certify not only the details of vehicle but also the seating capacity. Words principally designed used in heading 8702 or 8703 of Central Excise Tariff is applicable only to basic variants in view of clarification issued by Board. Clarification read with Tariff heading shows that it is not the number of persons the vehicle is capable of carrying that is relevant, it is actual number of passengers it can carry at the time of removal from the factory. Held that - thus vehicles classifiable under Heading 8703 and assessee are eligible for benefit of Notification No. 5/99-C.E.

Issues Involved:
1. Classification of motor vehicles under the Central Excise Tariff Act.
2. Eligibility for exemption and refund under Notification No. 05/98 and 05/99.
3. Interpretation of "principally designed" in the context of vehicle classification.
4. Compliance with conditions for claiming refunds.

Detailed Analysis:

1. Classification of Motor Vehicles under the Central Excise Tariff Act:
The core issue was whether the vehicles manufactured by Bajaj should be classified under CETH 8702.10 or 8703.90. Bajaj classified vehicles with seating for more than six persons under 8702.10 and those with seating for six or fewer under 8703.90. The department contended that the vehicles should be classified based on their principal design, not actual seating capacity at the time of clearance.

2. Eligibility for Exemption and Refund under Notification No. 05/98 and 05/99:
The notifications provided a reduced duty rate for vehicles classified under 8703.90, subject to conditions. Bajaj claimed refunds on the basis that their vehicles, cleared with seating for six or fewer persons, met the conditions. The department argued that the vehicles were principally designed for more than six persons, thus not eligible for the exemption.

3. Interpretation of "Principally Designed" in the Context of Vehicle Classification:
The term "principally designed" was pivotal. The department argued that it referred to the basic model's design capacity, which included more than six persons. Bajaj countered that each variant was separately certified by ARAI, indicating compliance with specific seating configurations at the time of clearance.

4. Compliance with Conditions for Claiming Refunds:
Bajaj met the conditions of the notifications by paying the required duty, filing refund claims within six months, and furnishing certificates from State Transport Authorities confirming the vehicles' registration as taxis. The department questioned the validity of these certificates, asserting that registration did not reflect the principal design.

Judgment Summary:

Classification of Vehicles:
The tribunal upheld Bajaj's classification under 8703.90, noting that the vehicles were cleared with seating for six or fewer persons, as certified by ARAI. The tribunal emphasized that the design and drawings for each variant were separately certified, supporting Bajaj's classification.

Eligibility for Exemption and Refund:
The tribunal confirmed Bajaj's eligibility for the exemptions under Notification No. 05/98 and 05/99. Bajaj fulfilled all conditions, including timely filing of refund claims and providing necessary certificates. The tribunal rejected the department's argument that the vehicles were principally designed for more than six persons based on the basic model's capacity.

Interpretation of "Principally Designed":
The tribunal disagreed with the department's interpretation, stating that the term should consider the actual seating capacity at the time of clearance, not the potential capacity of the basic model. The tribunal relied on the certificates from ARAI and the Motor Vehicles Act, which required specific seating configurations for registration.

Compliance with Conditions:
The tribunal found that Bajaj complied with all conditions for claiming refunds. The certificates from State Transport Authorities were deemed valid, confirming the vehicles' registration as taxis. The tribunal noted that the vehicles were not altered post-clearance, adhering to the Motor Vehicles Act.

Conclusion:
The tribunal dismissed the department's appeals, affirming that Bajaj's vehicles were correctly classified under CETH 8703.90 and eligible for the claimed exemptions and refunds. The tribunal's decision was based on the actual seating capacity at the time of clearance, compliance with notification conditions, and the validity of certificates from recognized authorities.

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