Classification of Vehicle as per Rule 2 (a) of General Rules for Interpretation is not valid as Vehicle at time of Clearance did not possess essential character of ambulance: CESTAT sets aside classification by Commissioner [Read Order]

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) has held that the classification of the vehicle as per rule 2 (a) of general rules for interpretation is not valid as the vehicle at the time of clearance did not possess the essential character of the ambulance.

Force Motors is engaged in the manufacture of light commercial vehicles, while GVK Research Institute is engaged in providing emergency medical services to the Government of Karnataka. GVK Research Institute invited a tender for the supply of Original Equipment manufacturer-integrated vans for conversion into 367 Ambulances. Force Motors submitted the tender and ultimately GVK Research Institute placed the purchase order on Force Motors for supply of the aforesaid OEM integrated vans.

The issue is as to whether the vans supplied by Force Motors would merit classification as delivery vans falling under Excise Tariff Item  8704 21 90 or as ambulances under ETI 8703 33 92 of the Central Excise Tariff Act 1985.

The Commissioner, by the impugned order, has classified the vehicles under ETI 8703 33 92 of the First Schedule to the Tariff Act as ambulances and has, therefore, directed Force Motors to pay the differential duty with penalty and interest. The Commissioner has also imposed penalties upon various GVK Emergency Management & Research Institute units.

Shri S.A. Gundecha, counsel of Force Motors Shri Pankaj, Finance Head of GVK Research Institute as also Shri Rakesh Agarwal, authorized representative appearing for the department, it would be appropriate to briefly examine the show cause notice issued by the department, the reply submitted by the appellant and the order passed by the Commissioner. 

The show cause notice alleged that from the technical specifications contained in the tender it would be clear that GVK Research Institute invited to tender for the supply of incomplete ambulances having the essential character of an ambulance and Force Motors offered to supply vehicles having additional features suitable for conversion into the ambulance and thus, as the vehicles sought by GVK Research Institute were for use as an ambulance, Force Motors misclassified the vehicles as traveller delivery vans instead of ambulances and did not pay the proper central excise duty.

The show cause notice, after referring to rule 2(a) of the General Rules for the Interpretation of the First Schedule to the Tariff Act, alleges that the vehicles cleared by Force Motors would, therefore, be appropriately classifiable under ETI 8703 33 92 and not under ETI 8704 21 90. The show cause notice also invoked the extended period of limitation contemplated under section 11A(4) of the Central Excise Act, 19448.

A two-member bench comprising Justice Dilip Gupta, President and Ms Hemambika R Priya, Member (Technical)  observed that the goods have to be assessed in the form in which they are presented at the time of clearance and not in the form they may ultimately take. The vehicles at the time of clearance did not have the essential character of an ambulance. What was purchased were bare delivery vans without any fittings. The order passed by the Commissioner classifying the vehicles under ETI 8703 33 92 of the First Schedule to the Tariff Act cannot be sustained.

The CESTAT set aside the penalty imposed and allowed the appeal.

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