By TIOL News Service

NEW DELHI, JUNE 30, 2017: THE appellants are engaged in the manufacture of tyres, tubes and flaps [CETH40.11, 40.12 and 40.13].

Revenue held a view that the tyres, tubes and flaps will be covered under Sl. No. 97 of the notification 11/2006-CE (NT) as "parts, components and assemblies of automobiles" and, therefore, the appellants are liable to discharge Central Excise duty on these items based on MRP, with abatement of 33.5%.

A differential duty demand of Rs.6,16,742/- was confirmed by the lower authorities for the period 01/06/2006 to 31/07/2006.

The appellant is before the CESTAT.

After considering the submissions made by both sides, the Bench inter alia observed –

+ The Original Authority has given a very cryptic finding to the effect that in terms of decision of Supreme Court in the case of G.S. Auto International Ltd. = 2003-TIOL-92-SC-CX, the classification of goods is to be determined by commercial identity test and not by functional test. Accordingly, he held that tyres, tubes and flaps have "the identity with automobiles and prove themselves to be part of automobile".

+ The Apex court categorically held that for classification, the test of commercial identity and not the functional test should be applied. It needs to be ascertained as to how the goods, in question, are referred to in the market by those who deal with them, be it for the purposes of selling, purchasing or otherwise. Wockhardt Life Sciences Ltd. = 2012-TIOL-24-SC-CX , Connaught Plaza Restaurant (P) Ltd. = 2012-TIOL-114-SC-CX and Kartos International = 2011-TIOL-39-SC-CT refers.]

+ In the case of appellant's unit in Mysore, similar dispute arose. The Commissioner (Appeals), following the earlier appellate order dated 14/05/2010, which was accepted by the Department, held that tyres, tubes and flaps manufactured by the appellant's unit at Mysore is not to be assessed under Section 4A as parts of automobiles.

+ It is to be noted that tyres and tubes are not only used for automobiles. They are used in animal drawn vehicles, aircrafts and various other machineries. As such, even on this ground, it is not tenable to hold the tyres and tubes are to be considered as parts and components of automobiles.

Concluding that there is no merit in the impugned order, the same was set aside and the appeal was allowed.

(See 2017-TIOL-2220-CESTAT-DEL)