Excise Duty Demandable only on Job worker as Actual Manufacture of Motor Vehicles and Not on Raw-Materials Supplier: CESTAT [Read Order]

The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that Excise duty can be demanded only on the job worker who is considered as the actual manufacture of a motor vehicle and not on raw materials supplier. 

Tata Motors Limited, the appellant assessee engaged in manufacturing chassis of commercial motor vehicles in their Jamshedpur factory, and such chassis, apart from being sold to independent customers from the factory gate was also supplied to independent bodybuilders for building body thereon, in the premises of the job-worker and the bodybuilders thereafter supplied by the bodybuilder to the Regional Sales Offices(RSOs) of the assessee for sale to customers. 

The assessee appealed against the order passed by the Commissioner of Central Excise for confirming the demand of Central Excise duty amounting to Rs. 21,27,34,334/- along with interest and equivalent penalty. 

Shovit Betal, the counsel for the assessee contended that the activity of building body on the chassis amounts to the manufacture of motor vehicles, in terms of Chapter Note 5 of Chapter 87 of the Central Excise Tariff Act, 1983, and on this reason, only the bodybuilder was paying excise duty at the time of clearance of body-built vehicle to the RSO. 

Also submitted that it was settled law that in the case of a job-work transaction, the job-worker was the manufacturer and not the raw-material supplier. 

M. Ranjan, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was liable for the excise duty demand. 

The Bench observed that in the case of Tata Engineering and Locomotive Company Ltd. v. UOI, the court held that the assessee who merely supplies the chassis to the body-builder and receives the body-built vehicle from the body-builder was not the manufacturer of the body-built vehicle, even though the assessee supervises the quality of such body-built vehicles before clearance by body-builder and noted that the bodybuilders only to be the actual manufacturers. 

The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that the job worker was the actual manufacturer and not the raw-material supplier and the excise duty was demandable only on job-workers who were the actual manufacturer of the motor vehicle. 

To Read the full text of the Order CLICK HERE

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