By TIOL News Service

MUMBAI, OCT 19, 2016: THIS is an appeal filed in the year 2005.

The appellant is primarily engaged in the activity of body building on the chassis sent to them and discharges CE duty liability on the body which is built on the chassis and for which the appellant avails the benefit of Notification No. 3/2001-CE and 6/2002-CE, as the case may be. In some specific cases, the building of body on the chassis cannot be undertaken unless the leaf springs of the chassis are rectified/upgraded or replaced and in order to execute such work the appellant got the leaf springs modified or replaced as per the requirement of the body to be fabricated and received some consideration from the manufacturer of the chassis. Revenue wants to tax this amount.

The lower authorities upheld the demand and so the appeal was filed before the CESTAT.

The Commissioner (A) came to the conclusion that replacement /modification of the spring leaf is done to make chassis suitable for fitment of the tipper-body and without this modification/replacement it could not be fitted with the tipper body, hence, this has to be treated as a part of the manufacture of body of motor vehicles and dumpers.

The Bench, after considering the submissions, observed -

"4. …We do not find this reasoning recorded by the first appellate authority will survive the scrutiny of law for more than one reason. Firstly, we find that the chassis is manufactured by the motor-vehicle manufacturer along with the leaf springs for fabrication of body. The leaf springs cannot be identified as independent of chassis on which duty is paid as manufactured item, by the manufacturer. Secondly, we find that Notification No. 3/2001-CE dated 01/03/2001 and 6/2002-CE dated 01/03/2002 specifically indicate, for discharge of concessional duty liability, shall be excluding the value of chassis used in such vehicle. Assuming even if the modification/replacement of the leaf spring is considered as a manufacturing activity, it would be manufacturing activity on the chassis and not on the body building activity. As per notification 3/2001-CE and 6/2002-CE value of the chassis needs to be excluded, if it is so, there cannot be any demand on the said value/amount received by the appellant for modification/replacement of the leaf springs before fabricating the body on the said chassis…."

Adding that the Bench is guided by the ratio of the Tribunal's judgment in the case of Mukul Engineering Works - 2010-TIOL-641-CESTAT-MUM, the impugned order was held to be unsustainable and set aside.

The appeal was allowed.

(See 2016-TIOL-2725-CESTAT-MUM)