9911796707
TMI Blog2022 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as the final products manufactured out of these bodies are fully exempted from payment of Central Excise duty. 2.4 Thus Show Cause Notice dated 02.07.2009 was issued to the respondents asking them to show cause as to why:- (a) The product tipper bodies manufactured and used captively by the assessee should not be classified under CSH 8707. (b) The duty of C. Ex amounting to Rs. 74,87,8441- (Rupees Seventy Four Lacs Eighty Seven Thousand Eight hundred Forty Four only) and Ed. Cess of Rs. 2,24,635/- (Rupees Two Lacs Twenty Four Thousand Six hundred and Thirty Five only) in respect of 82 numbers Tipper Bodies cleared by them during the period June '08 to March '09, valued at Rs. 5,49,72,2211- (as detailed in Annexure 'A' appended hereto) should not be demanded and recovered under the provisions of Section 11A of Central Excise Act, 1944. (c) Interest on the above should not be recovered under the provisions of Section 11AB of the Central Excise Act, 1944 and (d) Penalty should not be imposed under Rule 25 of the Central Excise Rules, 2002. 2.6 The show cause notice was adjudicated by the Commissioner as per the impugned order. 2.7 Aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n The adjudicating authority therefore failed to appreciate the fact that body building the chassis amounts to manufacture of distinct excisable goods and is classifiable under chapter 8707 of the CETA 1985. The 'Body' and the 'Motor Vehicle' are two different commercial commodities having separate, distinct and identifiable marketability and saleability. It is a matter of undisputed fact that the Noticee is engaged only in body building business for different types of motor vehicle. The tipper body and the garbage compactors manufactured by the Noticee in the present case are also types of body fabricated or mounted on the chassis for transporting loose material for various purposes. The stand alone bodies or the bodies mounted/fitted subsequent to manufacturing separately, are being cleared by the Noticee to their various customers on payment of central excise duty treating them as excisable goods manufactured under chapter heading 8707. This fact is evident from the production/ clearance records furnished in the periodical returns filed with the department. Therefore it is abundantly clear that the similar bodies manufactured by the Noticee is having chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt types cleared by the Noticee attract 'NIL' rate of central excise duty in terms of Notification 6/2006-CE dt 1/3/2006. The Notification 67/95-CE dt. 16/3/1995, exempts intermediate excisable goods when used only for manufacturing of dutiable goods and not when used/captively consumed for final product which attracts 'NIL' rate of duty. Hon'ble Tribunal in the case of Kerala State Road Transport Corp., Vs. CCE Trivandrum 2007 (216) E.L.T. 69 (Tri. Bang.) has held that; Para 5. The fact that the appellants purchased duty paid chassis and undertaken body building is not in dispute. It is well settled that the bodies built on chassis would be classifiable under CH 87.07 attracting Central Excise duty at 16% ad valorem. The contention of the appellant that they are not the manufacturers in view of the fact that they do not sell the buses cannot be accepted as Excise duty is levied on manufacture and when goods are manufactured for captive consumption, they are liable to duty. The ratio of the above judgment is applicable in the present case also. Therefore, the noticee are liable for payment of Central Excise duty at the applicable rate on their inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that fabrication of bodies on chassis would amount to manufacture of motor vehicle'. For filing the appeal revenue has relied upon the following decisions: Darshan Singh Pavitar Singh [1988 (34) ELT 631 (P H)] Ram Body Builder 1997 (94) ELT 442 (S.C.)] Kamal Auto Industries - 2000 (121) ELT A70 (S.C.). Kerala State Road Transport Corp. [2007 (216) ELT 69 (T.). Reliance placed by the revenue is totally misplaced and the said decisions are clearly distinguishable. Relevant chapter headings in the Tariff have to be interpreted and applied in the view of relevant Section Notes and Chapter Notes which are statutory and binding. No dispute with respect to classification of Garbage Compactor under Heading 87.05 as special purpose vehicle'. No dispute with respect to classification of Tipper Truck /Vehicle' under Heading 8704. That being so these will be exempted as Sl. No. 39 of Notification No.6/2006 CE dated 1.3.2006. In case of CCE Vs. Kailash Auto Builders Ltd. 2010 (257) ELT 582 (T.), CESTAT held that 'Skip Loader , a specially designed garbage collection vehicle required by municipal local bodies, was classifiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0000 14% 1225000 36750 0 Tipper Body 0 0 0 0 August 08 15 Garbage Compactor 11625000 14% 1627500 48825 0 Tipper Body 0 0 0 0 Septembe r 08 19 Garbage Compactor 16490000 14% 2308600 69258 0 Tipper Body 0 0 0 0 October 08 0 Garbage Compactor 0 0 0 0 0 Tipper Body 0 0 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Division is due the fact that the Garbage Compactor manufactured in the month of March, 2009 are not shown in the show cause notice and reply of the noticee, while in fact 31 number of Garbage compactors have been manufactured in the month of March, 2009. The above facts have been verified from the monthly ER-1 returns filed by the noticee and it is observed that that the noticee had been showing the Tipper bodies and Garbage Compactors separately in their ERIS. They were claiming exemption Notifn. No. 6/2006-CE dated 01.03.06 (Sl. No. 39 read with condition No. 9) for Tipper Bodies and exemption Notifn. No. 6/2006-CE dated 01.03.06 (SI. No. 50 read with condition No. 12) for Garbage Compactors and clearing the same without payment of duty. 15. The jurisdictional Central Excise Division also submitted Manufacturing process for Tipper Body and Garbage Compactor as under: Tipper Body After receipt of the chassis along with engine the specific sub- frames are fixed with welding and nut bolting to the chassis. Then the flooring of the Body as required by the customer is mounted on the chassis which is mounted on the single pivot so that the whole body can be made fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly several universal buckets are unloaded in one container. Since, the entire garbage is compacted, the truck can carry maximum amount of garbage at a time. The above stages of manufacture of Garbage Compactor are similar to the manufacture of vehicle where Tipper Body is mounted on the chassis itself. More appropriate classification of Garbage Compactor is 8705 for which by virtue of notification No. 6/2006-CE dated Sl. No. 50 is exempted with condition that the chassis should be duty paid.' 16. Further, the noticee in their written submissions dated 28.08.2009 has submitted a certificate by Chartered Engineer bringing out the production process and certifying accordingly that In my opinion the process of building of body piece by piece in an integrated manner on chassis, is such that the process starts from welding of sub-frame on chassis and what emerges then is complete vehicle. Body as independent identity does not come into existence as distinct product. 17. in view of the above firstly, w.r.t the issue of classification of the Tipper Body under 87079000 as proposed in the show cause notice, I observe that the allegation of a body coming int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as below: TABLE S. No. Chapter or heading or sub heading or tariff item of the First Schedule Description of excisable goods Rate Condition No 50. 8705 Special purpose motor vehicles Nil 12* *12 If manufactured out of chassis and equipment, on which the duty of excise leviable under the First Schedule or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid. 19. With regard to the 15 numbers of the Tipper bodies, I find that that these bodies are also inseparable part mounted / fabricated on the chassis as confirmed by the Chartered Engineer's certificate and the report from the jurisdictional Central Excise Division. Since, in this case also the Body becomes an inseparable part of, and are mounted/ fabricated on the chassis, I find that question of applicability or otherwise of notification No. 67/95-CE dated 16.03.95 does not arise. Further, I agree with the contention of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest and penalty does not arise. 4.3 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. Para 2 of the show cause notice records as follows: 2. Whereas upon physical examination of the manufacturing process it was observed that the assessees first manufacturing tipper body on stands/ steels separately by cutting and fabrication resulting in manufacture of the body having the essential character of body for carrying goods. The assessee further completes and finishes the body by painting etc on the stand itself. These bodies are thereafter, assembled on the main chassis of motor vehicles to complete the motor vehicles. The essential characteristics of the upper body/ tipper truck are to hold or contain the stored goods. This fabricated body therefore appears to be correctly classifiable under CH 8707 under sub- heading 87071000 for the vehicle of heading No 8703 and under heading No 87079000 for other vehicles. The entire show cause notice has been issued to the appellant basing on this para. Commissioner has considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parts is complete that the specialised equipment is identifiable but at that stage the whole thing is a vehicle with the equipment fitted on it and not the equipment as such and it is the specialised vehicle which is removed from the factory and not the equipment as a separate article When the whole thing is one identifiable entity - a specialised motor vehicle - there is no warrant in the Tariff to notionally break it into two parts for the sake of assessing the equipment part separately under Item 68. The scheme of the Tariff was, on the contrary, quite the opposite. It was to treat the whole composite thing as a motor vehicle but to ignore the specialised equipment part while assessing the composite vehicle. Since the specialised equipment did not come into existence as a separate identifiable article, but was born only as a fixture of the specialised vehicle, there was no question of removal of the specialised equipment as such for the purposes of Rules 9 and 49 of the Central Excise Rules, 1944 5 . Assuming that the specialised equipment part could yet be taxed under Item 68 by taking the line that it was immaterial that such equipment was a fixture on the chassis, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also accepted by the Tribunal. Even after the introduction of the eight digit tariff, the above principle has not undergone change and commissioner has referred to the manufacturing process and arrived at the said finding hence in our view the benefit of exemption claimed under notification No 6/2006-CE by the respondents cannot be denied as has been held by the impugned order. 4.5 In case of CCE Vs. Kailash Auto Builders Ltd. 2010 (257) ELT 582 (T.), 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. Tribunal observed as follows: 5. On careful examination of the submissions made by both the sides, we find that the Commissioner while deciding the issue of classification of the vehicle followed the decision in the case of Indian Hydraulic Industries (P) Ltd. (supra), wherein the Tribunal has held that since the specialized equipment did not come into existence as a separate identifiable article, but was born only as a fixture of the specialized vehicle, there was no question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of Notification No. 162/86 as provided at Sl. No. 11 as per condition that appropriate duty of excise has been paid on the chassis and on the equipment used in the manufacture of such vehicles. In view of the above discussion, the impugned order is set aside and the appeal is allowed. 7. We have also examined the Order-in-Original, wherein the Commissioner has considered the activity taken over by the respondent in detail i.e. the equipment is fabricated and fitted on the chassis and supplied to Municipal Corporation, who use the Skip Loader for collection and carrying city garbage stored in specially designed containers placed on road. In this case, no such independently marketable goods come into existence. He also found that the facts of the case are similar to the case of Maniar Company (supra). Although, in this case the respondent s contention that the vehicle is classifiable under Chapter heading 87.04, that contention was rejected holding that collection of garbage cannot be treated as transport of goods and classifiable the Dumper Placer as special purpose vehicle under Chapter Heading 87.05. 8. We are in agreement with the view taken by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to manufacture for the purpose of levy of duty. The finding of the Collector (Appeals) that with the introduction of Chapter Note 3 under Chapter 87 the position in regard to classification of items has changed radically. This view does not appear to be correct view in view of the fact that there are two points involved as and when goods are manufactured and assessed to duty. The first point is whether particular process or processes amount to manufacture and if it amounts to manufacture these goods become dutiable. 7. The second point is : When once goods are dutiable what should be the rate of the duty. For the purpose of the rate of duty the classification of the goods becomes necessary. In the case before us we observe that the Collector (Appeals) had referred to the contention of the party that onus is on the Department and that the Department should produce evidence to support this case for change of Chapter heading and since the Department had not discharged this onus the earlier classification itself continues. It was also contended by the appellants that the show cause notice only alleged that these goods were classifiable under sub-heading 87.01 to 87.05 that spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or vehicles, but at the same time, we find that this Chapter Note does not cover the bodies built on chassis fitted with engine which is classifiable under Chapter Heading 8706. Therefore the classification of bodies built by independent manufacturers on chassis is classifiable under 87.06. In this view of the matter, we find that the decisions of the Tribunal cited and relied upon by the appellants regarding the classification of bodies built on chassis still holds good. Having regard to the above discussion, we hold that bodies built on the chassis fitted with engine are classifiable under Chapter Heading 87.07. This decision was affirmed by the Hon ble Apex Court as reported at [2000 (121) ELT A70 (SC)]. Thereafter Chapter Note 3 (Now 5) was amended as follows: For the purposes of this Chapter, building a body or fabrication or mounting or fitting of structures or equipment on the chassis falling under heading 87.06 shall amount to manufacture of a motor vehicle. Board also clarified vide Circular 447/13/99 dated 22.03.1999 also clarified as follows: I am directed to say that on dismissal of Department s appeals by Supreme Court on 2-9-1997 in the case of CCE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading 8705 and found them to be eligible for benefit of exemption as special purpose vehicle under Notification No 6/2006-CE. 4.7 In the case of Kerala State Road Transport Corporation, relied upon by the revenue tribunal has observed as follows: 5. The fact that the appellants purchased duty paid chassis and undertaken body building is not in dispute. It is well settled that the bodies built on chassis would be classifiable under CH 87.07 attracting Central Excise duty at 16% ad valorem. The contention of the appellant that they are not the manufacturers in view of the fact that they do not sell the buses cannot be accepted as Excise duty is levied on manufacture and when goods are manufactured for captive consumption, they are liable to duty. 5.1 With regard to the entitlement of the appellant to the benefit of Notifications, the Commissioner (Appeals) in Para 10 of the impugned order, has stated that the Notification No. 5/98-C.E., dated 2-6-1998 is applicable only to the goods of Heading Nos. 87.02, 87.03 and 87.04 and not applicable to 87.07. Similarly, he has examined the Notification 6/2002-C.E. and given a finding that the same is not applicable to CH 87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15-31/Adj./08-09 07.07.08 923554 June,07 to May,08 4 V/1528/Kailashvahan udyog/Adj./04 26.02.02 192174 March,01 to June,01 5 V/1528/Kailashvahan udyog/Adj./04 21.06.02 44099 July,01 to Feb.,02 6 V/1528/Kailashvahan udyog/Adj./04 31.03.03 211054 March,02 to Dec.,02 7 V/1528/Kailashvahan udyog/Adj./04 09.02.04 15349 Jan.,03 to Feb., 03 8 V/1528/Kailashvahan udyog/Adj./04 25.03.04 53178 March,03 to Dec.,03 9 V/1528/Kailashvahan udyog/Adj./04 26.02.02 81357 Oct.,06 to May,07 Since the issue has been decided by the authorities dropping the demands for earlier period on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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