Whether containers fabricated for mounting on vehicles eligible for benefit of exemption notification 9/96-CE?

PJ/Case Law/2013-14/1962

Case:- TAMILNADU STATE TRANSPORT CORPN. LTD. Vs C.C.E., COIMBATORE

Citation:- 2013 (295) E.L.T. 456 (Tri. - Chennai)

Brief facts:- The appellants were engaged in the manufacture of Bus Body (Passenger) vehicle, lorries including water tankers mounted on chassis classifiable under Heading No. 8702/8704 of the Central Excise Tariff Act, 1985. They fabricated water tanker and mounted on the chassis. Water tanker lorries were cleared without payment of duty by availing exemption Notification No. 162/86, dated 1-3-1986. Show Cause Notices were issued proposing demand duty and to deny exemption notification. The adjudicating authority dropped demand of duty of Rs. 14,969/- for clearances on 23-7-1993 and 8-10-93 and Rs. 19,799/- for clearances on 26-2-1993, 13-4-1993 and 21-5-1993 on the basis of Notification No. 9/96-C.E. (N.T.), dated 17-5-1996 issued under Section 11C of the Central Excise Act, 1944. Revenue filed appeals before Commissioner (Appeals). By the impugned order, the Commissioner (Appeals) set aside the adjudication orders and confirmed the demand of duty as proposed in the Show Cause Notices.

Appellant’s contentions:- Ld. advocate for appellant submitted that the adjudicating authority rightly dropped the demand of duty following Notification No. 9/96-C.E. (N.T.), dated 17-5-1996 issued under Section 11C of the Central Excise Act, 1944. He submitted that Notification No. 9/96 exempted duty of excise on parts and components fabricated and captively used for building body on the chassis of the motor vehicles during the period commencing from 28-2-1993 to 28-2-1994. He submitted that by Board’s Circular No. 2/89, dated 13-1-1989 (F. No. 156/34/88-CX.4), it had been clarified that container/tank fabricated for mounting on chassis in the manufacture of road tankers would be regarded as fabrication of bodies for motor vehicles. He also relied upon the decision of Tribunal in the case of Andhra Sugar Mills Ltd. v. C.C.E., Guntur - 2007 (207)E.L.T.534 (Tri.-Bang.)

Respondent’s contentions:- Ld. AR reiterated the findings of the Commissioner (Appeals). He submitted that the exemption notification under Section 11C would apply in respect of parts and components fabricated and captively used for building a body on the chassis of motor vehicle. He submitted that tanker fabricated by the applicant was falling under Chapter 72 which was not a component or parts and therefore it was not covered under the Notification 9/96. He also submitted that Exemption Notification No. 9/96 was restricted only to parts or a component. He submitted that the water tankers manufactured out of MS sheets were dutiable item under sub-heading 7309.00 and not covered by Notification 9/96 (supra).
Reasoning of judgment:- After hearing both the sides, and on perusal of the record, the relevant portion of the Notification No. 9/96-C.E. (N.T.), dated 17-5-1996 was reproduced below :-
“Whereas the Central Government is satisfied that according to a practice that was generally prevalent regarding levy of duty of excise (including non-levy thereof) under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944), the duty of excise on parts and components fabricated and captively used for building a body on the chassis of a motor vehicle falling under heading No. 87.02 or 87.04 of the Schedule to the Central Excise Tariff Act, 1985, (5 of 1986) was not being levied under Section 3 of the said Central Excises and Salt Act during the period commencing on the 28th day of February, 1993 and ending with the 28th day of February, 1994.
2. Now, therefore, in exercise of the powers conferred by Section 11C of the said Central Excises and Salt Act, the Central Government hereby directs that the duty of excise payable under the said Central Excises and Salt Act on such parts and components, but for the said practice, shall not be required to be paid in respect of such parts and components on which the said duty of excise was not being levied during the period aforesaid in accordance with the said practice.”
On a perusal of the above notification, it was clear that the exemption benefit would be extended for parts and components fabricated and used for building a body on the chassis of the motor vehicle. It was noted that classification of parts and components had not been specified in the notification. In the present case, the adjudicating authority observed that tankers so manufactured and fitted on the vehicle chassis were dismountable by loosing nuts and bolts. The Bench found that the C.B.E. & C. by circular dated 13-1-1989 clarified that the tanks/containers of road tanker or rail tank wagons did not have the identity of a separate and distinct product of tanks/containers covered by Chapter 73 or 83 or 86, but were more appropriately considered as parts of motor vehicles for carriage of goods, or trailers or tanker wagons since they had no other use and were specifically designed for them. It had been clarified that container/tank fabricated for mounting on chassis (Heading No. 8706) in the manufacture of road tankers (Heading No. 8704) would be regarded as fabrication of bodies for motor vehicles under Heading 8707 or fabrication of bodies for trailer/semi-trailer (Heading 8716).
After considering the facts of case and in view of Board’s circular dated 13-1-1989, the Bench had no hesitation to hold that, in the present case, the fabricated water tank, mounted on chassis would be considered as parts and components captively used for building on chassis of a motor vehicle and covered under Notification No. 9/96-C.E. (N.T.), dated 17-5-1996 and exempted from duty for the period commencing from 28-2-1993 to 28-2-1994. Accordingly, they set aside the order of the Commissioner (Appeals) and upheld the order of the original authority subject to demand of duty for the period 28-2-1993 to 28-2-1994 would be dropped. Both the appeals were disposed of on the above terms.

Decision:- Appeal was disposed off.

Comment:- The analogy drawn from the case is that the tanks/containers of road tanker or rail tank wagons did not have the identity of a separate and distinct product of tanks/containers covered by Chapter 73 or 83 or 86, but were more appropriately considered as parts of motor vehicles for carriage of goods, or trailers or tanker wagons since they had no other use and were specifically designed for them and hence would be regarded as fabrication of bodies for motor vehicles . Thus they are squarely covered under exemption Notification granting exemption to parts and componentsfabricated and captively used for building a body on the chassis of a motor vehicle.

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PJ/Case Law/2013-14/1962

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