2026-VIL-1742-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Manufacture - Body building activity on fully built motor vehicles - Admissibility of exemption under Notification No. 12/2012-CE (S. No. 276 read with Condition No. 27) - Appellant engaged in body building on motor vehicles, received fully built motor vehicles, carried out certain modifications such as mounting tipper bodies and fixing side panels, doors and windows, and cleared them to customers claiming exemption treating the activity as body building on chassis - Adjudicating authority held that the activity amounted to manufacture of body of motor vehicle or parts and accessories, denied the exemption, confirmed the duty demand and imposed penalties - Whether the activities undertaken on fully built motor vehicles amount to manufacture under Section 2(f) of the CEA, 1944 read with the Chapter Note to Chapter 87, and whether the exemption is admissible - HELD - Goods are to be assessed to central excise duty in the form in which they are cleared. The documents of clearance themselves described the items as fully built motor vehicles - Mere addition of value is not sufficient to conclude that manufacture has taken place. If the fully built motor vehicles were cleared after modification, it must be established that the Appellant started with something other than a fully built motor vehicle before the activity can be treated as manufacture. Otherwise the Appellant has only refined or remade the existing motor vehicles, and whether such activity amounts to manufacture under Section 2(f) is the first point of determination. The impugned order does not determine whether the activities qualify as manufacture. Even if the activities amount to manufacture by virtue of the Chapter Note to Chapter 87, the starting point of manufacture must be the building of body on the chassis in the form it was received. If the activities were not in relation to building body on chassis, it needs to be determined whether the Chapter Note applies and whether the activities constitute manufacture at all. In the absence of any consideration of the issue of manufacture and excisability of the goods in the form in which they were cleared, the matter requires reconsideration along with the admissibility of the exemption notification – The appeal is allowed by remand - Central Excise - Extended period of limitation - Section 11A of the Central Excise Act, 1944 - Invocation for demand on clearances of body built motor vehicles under claim of exemption - Appellant 1 was registered with the department for a long time, regularly paid duty, filed returns and was subjected to departmental assessment, scrutiny and audit - Department invoked the extended period on the allegation of intent to evade payment of duty for the period beyond the normal period and the demand was confirmed - Whether the extended period of limitation could be invoked for making the demand - HELD - It is not the case of the Revenue that something was actively suppressed by the Appellant. The Appellant was registered, filed returns as prescribed and its records were audited from time to time. The Appellant was clearing the same or similar goods after undertaking these processes in the past also, without any objection by the Revenue authorities. Merely because the authorities changed their opinion in respect of the clearances, the Appellant cannot be said to be suppressing facts with intention to evade payment of duty. The Appellant undisputedly entertained a bonafide belief that the goods cleared were exempt from payment of duty for the long period. In the absence of fraud, collusion, wilful misstatement or suppression of facts with intent to evade payment of duty, invocation of the extended period is unwarranted, in light of the pronouncement of the Hon'ble Supreme Court. The decisions relied upon in the impugned order are distinguishable - Extended period of limitation could not have been invoked and the demand, if any, should be limited to the normal period of limitation under Section 11A of the Central Excise Act, 1944 - Central Excise - Penalty under Section 11AC of the Central Excise Act, 1944 - Imposition on Appellant 1 for short payment of duty on clearances of body built motor vehicles - Penalty equal to the confirmed duty was imposed on Appellant 1 under Section 11AC on the ground of suppression with intent to evade duty - Whether the penalty under Section 11AC is sustainable where the charge of suppression and intent to evade payment of duty is not upheld - HELD - The penalty under Section 11AC is attracted only where the short payment or non-payment of duty is by reason of fraud, collusion, wilful misstatement or suppression of facts with intent to evade payment of duty. As the charge of suppression, misstatement etc. with intent to evade payment of duty cannot be upheld for invoking the extended period of limitation, the penalty imposed on Appellant 1 in terms of Section 11AC cannot be upheld, as clarified by the Hon'ble Supreme Court distinguishing the issues of recovery, interest and penalty arising under Sections 11A, 11AA, 11AB and 11AC - Penalty imposed on Appellant 1 under Section 11AC set aside - Central Excise - Penalty under Rule 26 of the Central Excise Rules, 2002 - Imposition on Appellant 2, the Executive Director of Appellant 1, for acts of commission and omission leading to short payment of duty - Penalty was imposed on Appellant 2 under Rule 26 and was challenged in appeal as not legal and not sustainable - Whether the penalty on Appellant 2 under Rule 26 is sustainable - HELD - No case is made out against Appellant 2 for imposition of penalty under Rule 26, specifically when it is not found that duty was being evaded by resorting to fraud, collusion, suppression or misstatement with the intent to evade payment of duty - Penalty imposed on Appellant 2 under Rule 26 set aside and the appeal of Appellant 2 is allowed.
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