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TMI Blog2009 (11) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... motor vehicles and parts thereof classifiable under Chapter 87 of the schedule Central Excise Tariff Act, 1985. The vehicles manufactured by the appellants were classified under different Chapter headings depending upon the number of persons carried or load carrying capacity. Taking into account the various factors such as, seating capacity, type of brakes used, chassis, dimension of overall area to carry persons or goods, body design, wheel base, similar goods available and other relevant factors, Bajaj determined the seating arrangement or load carrying capacity and classified the vehicles accordingly after complying with the provisions to the Motor Vehicle Act, Central Motor Vehicle Rules and other Rules made by different State Governments. Rule 126 of the Central Motor Vehicle Rules required the appellants to obtain a certificate from one of the institutions mentioned in the said rules when a prototype of principal vehicle is developed by the appellants Research and Development department and manufactured for the same. 1.2 On development of following types of vehicles, the appellant submitted them for testing to the vehicle Research Development Establishment, Ministry of De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r) 1. Metador F-307 Station Wagon principally designed for transport more six persons (excluding driver) Wheel Base 2400 MM 8 8702.10 BED-24% Adv. SED-6% Adv Cess-1.8% Tariff Rate 2. Tempo Trax (Town and Country) for transport of more than six persons but not more than twelve persons (excluding driver) Wheel Base 2160 MM 17 8702.10 -do- -do- 3. Tempo Trax (Twon Country) for transport of more than six persons but not more than twelve persons (excluding driver) Wheel Base 275.G MM 18 39 8702.10 -do- -do- 4. Tempo Trax Wheel Base 2400 MM, transport of more than six persons, but not more than twelve persons (excluding driver) 58 59 8702.10 -do- -do- Motor vehicles principally designed for transport of not more than six persons (excluding driver) 5. Metador F-307 Station Wagon (Taxi) for transport of not more than six persons excluding driver. Wheel Base 2400 MM 32 8703.90 BED-24% Adv. SED-16% Cess-1/8% We will claim refund of excess duty paid on vehicles at the time clearance after following condition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer furnishes to the said Assistant/Deputy Commissioner, a certificate from an officer authorized by the concerned State Transport Authority to the effect that said Motor Vehicle has been registered for use solely as Taxi...." 2. After conducting enquiry, verification of various documents of the appellants and based on the several records, the department took a stand that the vehicles in question should have been classified under CETH 8702.10 and the refund claimed by them was not admissible and refund already sanctioned but not paid is to be treated as cancelled and refund already sanctioned and paid shall have to be paid back by the appellants. A sum of Rs. 22,26,354/- was considered as erroneously sanctioned and paid as refund, an amount of Rs. 84,41,443/- sanctioned to Bajaj but not paid was held to be not payable and claims for refund of duty amounting to Rs. 1,42,42,977/- were rejected as inadmissible. 3. Bajaj filed an appeal to the Commissioner (Appeals) and Commissioner (Appeals) in the impugned common order in respect of all the four appeals namely on classification and three refunds as discussed above and held that vehicles are correctly classifiable under he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic model is relevant and building of body and structure with different capacity would not be relevant for the purpose of classification. Therefore, even if the vehicle is classified under 87.03 because in the form in which cleared had less than six seats, Bajaj would not be eligible for exemption. Further he also drew our attention to the extract of cross-examination by the Original Adjudicating Authority in his order. Shri B.N. Ghosh, Senior Dy. Director of ARAI had stated that according to his judgment, it is the number of seats which were provided in basic model of a vehicle and certified by ARAI that is relevant fro the purpose of determination of principally designed transport capacity "for passengers" of a Motor Vehicle. He also submitted that the certificate issued by ARAI provides the seating capacity based on the number of seats attached by Bajaj at the time of producing of vehicle for testing and the certificate does not certify the maximum transport capacity of the said Motor Vehicles nor does it certify the principal design to which the said vehicles were manufactured as regards various variants of the basic model. 4.3 Further learned DR also relied upon the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri B.N. Ghosh on the basis of his understanding and knowledge, the clause "Principally designed" applies to the basic model. He pointed out with reference to certificates issued by ARAI that it is not only the basic model which has been certified by the ARAI but each and every variant of the basic model has also been certified giving details of the number of passenger it can carry. He also submits that in ARAI certificate there is a reference to design and drawings in respect of each variant which goes to show that for each and every variant, there is a separate design and drawing submitted by the appellant. The vary fact that ARAI has certified not only the basic model but also different variants indicating the seating capacity therein and also by taking note of the design and drawing separately for each variant shows that the contention of Shri B.N. Ghosh the clause 'Principally designed' applies to only basic model is not correct 5.1 He further submits that according to Rule 126 of Motor Vehicles Manual (As applicable in MP State) prototype of every Motor Vehicle is required to be subjected to test. The Rule specifies that prototype of every vehicle is required to be subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct itself specifically provides for number of passengers and therefore, the vehicle manufacturers necessarily have to clear the vehicle with specific seating capacity. Therefore, not only from point of view of classification under Central Excise Tariff Act but also from the point of view of adhering to the requirement of fulfilment of provisions of Motor Vehicle Act, the manufacturer has not only to design the basic model but also different variants with seats in it and specify the number of passengers also. Learned advocate submits that it is not the case of Revenue that Bajaj has not passed on the benefit of lower amount of duty to the Taxi owners; it is not the case of Revenue that registration certificates have not been obtained; it is not the case of Revenue that vehicles have been modified subsequently, in fact, Revenue has not shown even one vehicle to have been modified, it is not the case of Revenue that vehicles as they were cleared from the factory do not fulfil the requirement of the exemption Notification or were cleared without filing the classification declaration. 5.5 Ld. Advocate also submitted that the explanatory notes issued by the Board regarding budget chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otor Vehicles principally designed for the transport of more than six persons, but not more than twelve persons, excluding the driver 30% 8702.90 - Others 15% 87.03 Motor cars and other motor vehicles principally designed for the transport of not more than six persons, excluding the driver, including racing cars. 8703.10 - Three-wheeled motor vehicles 15% 8703.90 - Other 40% 6.3 It is not in dispute that Bajaj had filed classification declaration in respect of the vehicles. In respect of two models namely Matador F-307 and Tempo Trax, Bajaj had classified under 8702 and 8703 considering the seating capacity of the vehicle when they were cleared from the factory. The stand of the Revenue is that for classification under 8702 or 8703, what is relevant is principal design and not actual seating capacity of the vehicle. Therefore, the whole issue before us is whether the words "Principally designed" used in the classification heading is to be treated as applicable only to what is known as basic model or can it be said that the designing of the vehicle is complete only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicle but also the seating capacity. 7.2 Further, it is also seen from the records and certificates issued by the ARAI for each basic model as well as variant, there is a separate design and drawing which again shows that each model has to be treated as different and each one is designed separately. 7.3 Further, we also do not find sufficient force in the arguments advanced by the Revenue that the 'Principally designed' clause is applicable only to the basic variants in view of the clarification issued by the CBEC at the time of introducing changes in the budget and providing exemption to the vehicles which are used as taxi. The relevant clarification is reproduced as below :- "Motor Vehicles (Chapter-87). - The effective rate of duty on tractors of different engine capacities is incorporated in the Tariff itself. However, there is no change in the effective rate of duty on tractors. Tractors of engine capacity not exceeding 1800cc continue to be exempted and tractors of engine capacity exceeding 1800cc attract a duty of 10% ad valorem under their respective sub-headings in the tariff. (Finance Bill and S. Nos. 115 and 116 of Notification No. 16/96-Central Excise) Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no owner can alter the vehicle to change its seating capacity. 7.6 Further, the passenger Car, unlike Bus and Truck is not complete without seats. The design of a car is by taking into account the number of seats, the number of passengers it can carry. Therefore, contention of the learned DR that words 'Principally designed' would mean that the capability of carrying passengers is not based on any logic. Further, the clarification issued by the Board also provides that seating capacity of the motor vehicle can be ascertained from the registration certificate issued by the State Transport Authority. This very clause clearly shows that for the purpose of this exemption, what is relevant is number of passengers, the vehicle can carry as per the registration certificate. This seems to imply that even if the vehicle was cleared or could carry more passengers at the time of clearance, if the vehicle was registered with the transport authority for lesser number of passengers, it would still be eligible for exemption. However, it is well settled law that goods have to be assessed in the form in which they are cleared from the factory. Further, Motor Vehicles Act and the Rules also provi ..... 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