Judgment:
1. The Revenue filed this appeal against the order-in-original passed by the Collector of Central Excise, Pune.
2. Brief facts of the case are that a show cause notice was issued to the respondents alleging that the respondents are converting the bare chassis of Jeeps falling under Central Excise Tariff Item No.34-I(2)(ii) to motor vehicles with body 34-I(2)(i)(b) of the first schedule to the Central Excises and Salt Act 1944, after body building amounting to manufacture of motor vehicle. The Collector of Central Excise vide impugned order dropped the proceedings against the respondents.
3. The Revenue filed this appeal on the ground that motor vehicles with chassis manufactured and cleared by M/s. Mahendra and Mahendra falls under Tariff Item 34-I(ii) attracting the excise duty at the rate of 30/) and when fitted with body, it becomes motor vehicles with body and therefore is classifiable under Tariff Item 34-I(ii)(ib) of the tariff. The Revenue contended that by fitting Fibre glass reinforced body plastic kits on the chassis a new article i.e. motor vehicle with definite separate identity will come into existence as the conversion of motor vehicle with chassis into motor vehicle with body clearly involves a process of manufacture attracting the provision of Section 2(f) of the Central Excises and Salt Act. The motor vehicles with chassis only falls under Tariff Item No. 34-I(ii)(2) and after fitment of the body on the chassis, it becomes the motor vehicle with body falling under Tariff Item 34-I(ii)(ib) of the tariff. Therefore the duty is liable to be paid on such clearance. The Revenue further contended that fitment of FRP body kit on the chassis is a process which is incidental or ancillary to the completion of a product i.e.
the jeep with body and therefore is a process of manufacture.
4. Ld. Counsel appearing on behalf of the ld. respondents contended that the motor vehicles brought to the factory of the appellant by the customers/dealers are fully duty paid. These vehicles were purchased by the customers from Mahindra and Mahindra Ltd, are fully duty paid and are complete motor vehicles and no further manufacturing or other activities required to be carried out on them to make them motor vehicles. The respondents do not carry out any such activity for manufacture of motor vehicles, but only fitting the FRP kits as per customers requirement. He submits that FRP body kits which are used for body building and manufactured by the appellant and cleared after payment of duty before fitment of the vehicles. Therefore the process of fitting the FRP body on the duty paid chassis does not amount to manufacture. He submits that the respondents are carrying out the activity of body building under two different categories.
5. The first category is that the body building is activity on the vehicle which are received by the appellant from Mahindra and Mahindra Ltd. under Rule 56B of the Rules in respect of these vehicles after fitment of the body, vehicles were sent back to the Mahindra and Mahindra Ltd. under Rule 56B of the Central Excise Rules. In the second case the body fitment activity is in respect of other vehicles which are known as NC vehicles. The NC vehicles are fully duty paid when they are brought to their factory.
6. He submits that the appellants are not making any motor vehicles.
They are simply manufacturing the FRP body kits and they are paying the duty on these FRP body kits and thereafter the FRP body kits are fixed on duty paid chassis supplied by the customers or the chassis supplied by the Mahindra and Mahindra under Rule 56B of the Central Excise Act.
He submits that appellants are not engaged in manufacture of motor vehicles.
7. He relied upon the decisions of the Tribunal in their own case i.e.
Collector of Central Excise v. Roplas India Ltd. reported in 1991 (52) E.L.T. 240 and also the decisions of Punjab and Haryana High Court in the case of Darshan Singh Pavitar Singh reported in 1988 (34) E.L.T.631 (P & H) and, decision of Division Bench of Punjab and Haryana High Court in the case of Union of India v. Darshan Singh Pavitar Singh reported in 1990 (47) E.L.T. 532 and submits that in these cases the Hon'ble High Court held that the manufacture of body building are not manufacture of motor vehicle. He therefore prays that the appeal be dismissed.
8. Heard both sides. In this case the show cause notice was issued demanding Central Excise duty amounting to Rs. 46,71,591.29 for the motor vehicles cleared from their factory during the period from 26-10-1982 to 25-10-1985 without payment of duty. It is alleged in the show cause notice that assessee were manufacturing the motor vehicles without paying the duty and these are classifiable under Tariff Item 34(I)(2)(b) of the First Schedule to the Central Excises and Salt Act, 1944.
9. The Collector of Central Excise in the impugned order observed that the chassis received from the customers on payment of duty were motor vehicles and that remained so even after the fitment on FRP body kit and thus does not constitute manufacture in terms of Section 2(f) of the Central Excise Act, 1944. The Collector of Central Excise in the impugned order contended that parts of FRP body are cleared from the factory on payment of duty. Therefore there was no need to pay further duty on body building.
10. The contention of the Revenue is that motor vehicles with chassis are classifiable under Tariff Item 34-I(ii) and after fitment of body which become motor vehicle with body falling under 34-I(2)(i)(b) of the First Schedule to the Customs and Excise and Salt Act, 1944 (sic). The relevant entries are reproduced below: Item No. 34 Motor Vehicles, Tractors and Trailors---------------------------------------------------------------------Item No.Tariff Description Rate of duty---------------------------------------------------------------------1 2 3---------------------------------------------------------------------34.
Motor Vehicles and tractors including trailers -I Motor Vehicles (1) Two wheeled and three wheeled motor Twenty per cent ad vehicles valorem (i) Motor vehicles with body - Five per cent ad (a) saloon cars - valorem plus sixteen thousand rupees per (b) others Twenty-five per cent ad valorem (ii) Other motor vehicles (including Thirty per cent ad chassis whether or not with cab) volorem (3) Motor vehicles of engine capacity Twenty five per cent exceeding 2500 cubic centimeters ad valoremII. Tractors, including agricultural Fifteen per cent ad tractors valoremIII. Trailers Ten per cent ad valorem 11. The Tariff Entry says that motor vehicles with the body are classifiable under Tariff Entry No. 34-I(2)(b) of the Tariff. The contention of the appellant is that they are not manufacturing the motor vehicles and there is nothing on record to show that the appellant are manufacturing motor vehicles. In the impugned order the Collector of Central Excise also noted the fact that from the records it is verified that the appellants are paying duty on the component of FRP body before fitment on the vehicle. It is also not disputed by the Revenue that the chassis fitted with the engine were duty paid. The Hon'ble Punjab & Haryana High Court in the case of Darshan Singh Pavitar Singh v. Union of India and Ors. reported in 1988 (34) E.L.T.631 held in Para 10 as under : 10. A person who builds or fabricates a body on a chassis does not, from the notions of a common man, manufacture a motor vehicle. By fitting a body on chassis the petitioners do not cover the same into a motor vehicle. The chassis which are manufactured by a large scale industrial unit under licence from the Government of India are the motor vehicles as commonly understood. In order to determine as to whether particular products or goods are eligible to tax or excise duty, the test commonly applied is : how is the product identified by the class or section by people dealing with or vising the product. That is the test which is attracted wherever the statutes does not contain the definition of the product or the goods in question. [See Parrits and Spencers (Asia) Ltd. v. State of Han/ana - (1978) 42 S.T.C. 433]. It is by its functional character that a product is so identified. It is a matter of common experience that the identity of an article is associated with its primary function.
When a consumer buys an article, he buys it because it performs specific functions for him. It is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identified it in his mind. It has also been held by the final Court in a catena of cases that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted.
Applying these tests, the bodies build/fabricated by the petitioners on the chassis supplied by the customers cannot be terms to be motor vehicles. The petitioners do not proclaim or give out that they are manufacturing or selling motor vehicles. No person who wants to purchase a motor vehicle will go to the petitioners for this purpose, because the people in the transport business do not associate in their minds the body of the motor vehicle with the need which a motor vehicle supplies in real life. There are more than 500 body builders in the small State of Punjab. Such a large number of manufacturers of motor vehicles does not simply exist in the whole world. The people who think to purchase motor vehicles which they have to use for carrying passengers or transporting goods first purchase a chassis from the 4/5 large scale manufacturers. Then they commission the petitioners or other body builders to build/fabricate body thereon. Thereafter they put the motor vehicles into use. But the owner of a chassis does not approach a body builder with a view to get a motor vehicle manufactured from him. The petitioners do not complete or manufacture whole of the motor vehicle. They add only a body to the chassis. They do not engage themselves in any fine sophisticated manufacturing process so as to earn the high sounding epithet of manufacturers of motor vehicles. They just build a part of a motor vehicle. A part cannot be equated with the whole. Motor vehicles manufacturers do not manufacture tyres. Tyres are an integral part of a motor vehicle. Even then a person who undertakes supplying and fitting tyres to a motor vehicle does not manufacture a motor vehicle. If the interpretation canvassed by the respondents is accepted, then each motor vehicle is manufactured many times. But it is not a fact. So, this interpretation cannot be accepted because it is not in consonance with logic and reality.
12. The appeal filed by the Union of India against the decision was dismissed by the Division Bench of the Hon'ble Punjab and Haryana High Court vide judgment of Union of India v. Darshan Singh Pavitar Singh reported in 1990 (47) E.L.T. 532. The Revenue filed the Special Leave Petition against this decision and the same was dismissed by the Hon'ble Supreme Court in the case of Collector of Central Excise v. Rim Body BuildersCollector of Customs v. Roplas India Ltd. reported in 1991 (52) E.L.T. 240 the Tribunal after relying upon the decision of Hon'ble Punjab and Haryana High Court in the case of Darshan Singh Pavitar Singh held that converting the duty paid canvas hood jeeps into a Fibre glass reinforced (FRP) jeep build body, no new product emerges.
The appeal filed by the revenue against this decision of the Tribunal was dismissed by the Hon'ble Supreme Court reported as 1991 (54) E.L.T.A51.
14. In the present case there is no evidence on record to show that respondents are manufacturing the motor vehicles.
15. Though the above mentioned decisions are in respect of classification of body building on motor vehicles under the Central Excise Tariff Act, 1985, and the present case is under the old Central Excise Tariff but the observations made by the Punjab and Haryana High Court in the case of Darshan Singh Pavitar Singh (supra) on the activity of the body building in that case is also applicable in present case.
16. In view of the above mentioned decisions and in view of the fact that the respondents is paying the duty on the component of FRP body kit before the fitment to the chassis, we do not find any infirmity in the impugned order, the appeal is dismissed.