Customs, Excise and Gold Tribunal - Delhi
Kamal Auto Industries vs Collector Of C. Ex. on 29 January, 1996
Equivalent citations: 1996(82)ELT558(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The captioned appeal of M/s. Kamal Auto referred to as appellants is directed against the order of Collector (Appeals). The Collector (Appeals) in his order had held that bodies built on chassis by the independent body builders do not fall under Chapter Heading 87.07 and therefore not entitled to the benefit of Notification No. 175/86-C.E.
2. The other two appeals are filed by Collector requesting for setting aside the orders No. 51-CE/JPR/93, dated 29-3-1993 and 70-C.E./JPR/93, dated 30-4-1993. As the issue for determination in all the 3 appeals is the same, they are, therefore, being disposed of by this common order.
3. The facts of the case in brief are that the appellants are engaged in the manufacture of bodies of motor vehicles. For this purpose the appellants get duty paid chassis of motor vehicles of Headings 87.01 to 87.06 of the CETA on which they build bodies. The appellants submitted a classification list effective from 24-9-1992 in which they claimed classification of the goods under Chapter Heading 8707.00 and also claimed benefit of Notification No. 175/86-C.E., dated 1-3-1986 as an SSI Unit. The Department issued a show cause notice to the appellants to show as to why the bodies manufactured by them should not be classified under respective chapter Heading No. 8702 to 8705 and also as to why the benefit of Notification No. 175/86-C.E. should not be denied to them. The Assistant Collector followed the ratio of the decision of the Collector (Appeals) in an earlier case and classified the goods under Chapter Heading 8707 and also allowed the benefit of Notification No. 175/86-C.E. The Department reviewed this order of the Assistant Collector and filed an appeal before the Collector (Appeals). The Collector (Appeals) after examining all the evidences on record and submissions of both sides observed that with the introduction of Chapter Note 4, 1991 (now chapter Note 3) under Chapter 87 providing that "For the purpose of the Heading 87.01 to 87.05, the activity of body building or fabrication or mounting or fitting of structures or equipment on the chassis shall amount to 'manufacture' of motor vehicle". The Collector (Appeals) observed that this Chapter Note leaves no doubt that building bodies on chassis leads to manufacture of motor vehicles and such product would be classifiable under Heading 87.01 to 87.05 depending upon the nature and use of the motor vehicles produced and not under Tariff Heading 8707.00 The Collector (Appeals) also held that the benefit of Notification No. 175/86-CE which was applicable only to goods falling under Heading 8707 was not admissible to the appellants.
3A. Shri K.K. Anand, learned Advocate appearing for the appellants submitted that Chapter Note introduced in 1991 does not change the position. As this Chapter Note does not seek that the goods classifiable under Heading 87.07 shall be classifiable under Chapter Heading 87.01 to 87.05. The learned Counsel submitted that the appellants nowhere contended that the activity of body building does not amount to manufacture. On the contrary the learned Counsel submitted that the bodies built by independent body builders fall under Chapter Note 8707. The learned Counsel stressed that if the contention of Revenue is accepted then the entry against Chapter Heading No. 8707 will be rendered redundant. The learned Counsel also submitted that the Collector (Appeals) did not follow the ratio of the decision of the order passed earlier by the same authority and submitted that Bombay High Court had held that judicial discipline requires that the same authority should not ordinarily differ from the earlier orders passed by the same authority unless the difference is distinct and clear. The learned Counsel submitted that a lot of case laws were cited before the Collector (Appeals) which the Collector (Appeals) disposed of with the remarks that judicial pronouncements were made when the present Chapter Note was not in existence therefore they were not applicable, after introduction of Chapter Note 4 (now Chapter Note 3). The learned Counsel submitted that introductory Chapter Note 3 does not change classification of the bodies manufactured by independent body manufacturer and that judicial pronouncements cited were fully relevant even after introduction of Chapter Note 3. The learned Counsel submitted that in the case of Malwa Motor reported in 1989 (44) E.L.T. 653 (Tribunal), the Tribunal had held that bodies built on chassis fall under Central Excise Tariff Act Chapter Heading 87.07 and not under 87.02 or 87.04; for this purpose they had got support from decision of Punjab and Haryana High Court. The learned Counsel also referred to the decision of the Madhya Pradesh High Court in the case of Coach Builders (P) Ltd. reported in 1992 (58) E.L.T. 471 (M.P.) wherein it was held that body building on chassis is manufacture of motor vehicles under Central Excise Tariff Act and that body building on chassis falls under 87.07 and that SSI exemption under Notification 175/86-CE was admissible to the appellants. The learned Counsel submitted that [bodies] built on chassis of motors by the appellants were classifiable under Heading 87.07 and were eligible for benefit of exemption Notification No. 175/86-CE.
4. Shri A.T. Usman, learned JDR appearing for the respondent submitted that with the introduction of Chapter Note 3 under Chapter 87 the position in regard to leviability of duty as well as the classification of the goods has changed. He submitted that the Collector (Appeals) has rightly held that the case law cited by the appellants and relied by them pertained to the period prior to the introduction of Chapter Note 3 in Chapter 87 therefore those were no longer applicable. He submitted that in case the goods are not classifiable under Chapter Heading 87.07 then benefit of Notification No. 175/86-CE. is also not available and that the Collector (Appeals) has rightly denied them the benefit of the aforesaid Notification.
5. Heard the submissions of both sides. On careful consideration of the evidence on record and submissions made before us we find that the short issue is whether bodies built on chassis or motor vehicles are classifiable under Chapter Heading 8707 or under Chapter Headings 8702 to 8705 and also whether introduction of Chapter Note 3 has materially changed the position. Let us first examine whether introduction of Chapter Note 4 (now Chapter Note 3) under Chapter 87 has changed the position radically. This Chapter Note was introduced in 1991. This Chapter Note 3 reads :-
"for the purpose of Heading 87.01 to 87.05, the activity of body building or fabrication or mounting or fitting of structures or equipment on the chassis shall amount to 'manufacture' of motor vehicle."
Natural meaning of this note will be that building body on chassis shall amount to manufacture of motor vehicle. But this interpretation shall apply only to Chapter Headings 87.01 to 87.05. This clearly shows that if the goods are classifiable under Chapter Heading Nos. 87.01 to 87.05 then if any body is built on the chassis, this building of body shall amount to manufacture of motor vehicle. In the instant case we are not dealing with the goods which already fall under Chapter Headings 87.01 to 87.05.
6. In the case before us, bodies built on the chassis fitted with the engine for motor vehicles are classifiable under Chapter Heading 87.06. The Chapter Heading 87.07 is for bodies (including cabs) for the motor vehicles of Heading Nos. 87.01 to 87.06. The Chapter Note stipulates that if bodies are built or fabricated or mounted or structure fitted (sic.) or equipment on the chassis of motor vehicles classifiable under Heading 87.01 to 87.05 shall amount to manufacture. This Chapter Note, therefore excludes the bodies built on chassis classifiable under Chapter Heading 87.06. In the instant case bodies are built on duty paid chassis there is no dispute that mounting of bodies on chassis or fabrication on chassis even before introduction of Chapter Note 4 (Now Chapter Note 3) amounted 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 the duty the classification of goods becomes necessary. In the case before us we observe that the Collector (Appeals) had referred to the contention of the party that 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 charged this ones 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 specific sub-heading was not mentioned in the show cause notice, for the purpose of classification specific heading is needed. We also observe that the Collector (Appeals) has observed that in terms of Chapter Note 4 under Chapter 87 there is no doubt that building bodies on chassis leads to manufacture of motor vehicles and that such products would be classified under Heading 8701 to 8705 depending on the nature and use of the motor vehicles produces and not under Heading 8707. We also observe that the Collector (Appeals) has held that as for as the issue of exact sub-heading raised by the assessee is concerned, once the decision has been taken to exclude the goods produces from 8707, the rest is the matter of working out details, the individual details of each every item produced by the assessee can be worked out.
8. On examination, of the observations of the Collector (Appeals) and the conentions the appellants we find that no doubt Note 4 of Chapter 87 was introduced in 1991. This Chapter Note talks about the goods classifiable under Chapter Heading 8701 to 8705 and not the goods classifiable under Chapter Heading 8707; It may be mentioned that description of the goods classifiable under Chapter Heading 87.06 or 87.07.is specific and distinct. The same goods falling under Chapter Heading 87.01 to 87.05 cannot be further classified under Chapter Heading 87.07. It may also be mentioned that for chassis fitted with engine of motor 'vehicles there is specific heading under Chapter Heading 87.06. We also observe that bodies built on duty paid chassis there is specific heading under Chapter Heading 87,07. Admittedly in the instant case the appellants only make bodies built over the duty paid chassis, Having regard to the fact that for bodies built over duty paid chassis there is a specific heading and in terms of Rules of interpretation, the specific entry is to be preferred over general entry. Entries against Chapter Headings 87:01 to 87.05 are general whereas entry against Chapter Heading 87.07 is specific. We also observe that Heading 87.07 is [modelled] on the basis of Entry No. 87.07 of the Harmonised Commodity Description and Coding System and this heading covers wide range of bodies for various types of vehicles. No doubt, Chapter Note 3 clarifies that building a body for purpose of Headings 87.01 to 87.05 amounts to manufacture of motor 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.
9. In view of the fact the goods manufactured by the appellants are classifiable under Chapter Heading 87.07 therefore, they will be eligible to the benefit of Notification No. 175/86-C.E. as an SSI unit.
10. Having regard to the above findings, the impugned order in case of Appeal No. 1780/94-B is set aside and the appeal is allowed. Consequential relief, if any, shall be admissible to the appellants in accordance with law. The other two appeals by the Department are rejected.