1987(06)LCX0049

IN THE HIGH COURT, OF PUNJAB AND HARYANA AT CHANDIGARH

Sukhdev Singh Kang, J.

DARSHAN SINGH PAVITAR SINGH AND OTHERS

Versus

UNION OF INDIA AND OTHERS

Civil Writ Petition No. 5256 of 1986, decided on 5.6.1987

 ADVOCATES : M/s. H. L. Sibal, Sr. Advocate and S. C. Sibal, for the Petitioners.

Mr. H. S. Brar, Standing Counsel, for the Respondents.

[Judgment]. - Whether persons engaged in building bodies of buses and trucks on the chassis supplied by the customers become manufacturers of motor vehicles as defined under Section XVII, Chapter 87, Heading Nos. 87.02 and 87.04 of the Schedule to the Central Excise Tariff Act, 1985 (‘the Act’, for short) and are liable to pay excise duty and to take licence, are the issues raised in this bunch of writ petitions, i.e. C.W.P. Nos. 5256, 5732 and 5733 of 1986.

2. The petitioners are engaged in building bodies of trucks and buses on the chassis supplied by their customers. The petitioners are not licensed to and are not in a position to manufacture motor vehicles. They are small scale units whose annual turnover does not exceed Rs. 10 lakhs each. Section 2 of the Act prescribes the rates of excise duty leviable under the Central Excises and Salt Act, 1944 (Act 1 of 1944) and they are specified in the Schedule. Section 3 of the Central Excises and Salt Act is the charging section. It reads as under :-

“3. Duties specified in the Schedule to the Central Excise Tariff Act, 19S5 to be levied :

(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act, 1985."

3. The Act was enforced on February 28, 1986. Entries in Chapter 87 of Section XVII of the Schedule to the Act insofar as they are relevant for the purposes of the present controversy, read as under :-

4. Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, reads as under :-

“The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods.”

5. In exercise of these powers, the Central Government has issued notifications from time to time exempting various excisable goods of the description specified therein. Entry (4) of Notification No. 175/86-C.E., dated March 1, 1986, as amended and so far it is relevant for the purposes of these petitions is as under :-

“4. All other goods specified in the said Schedule other than the following, namely :-

(i) xxx xxx xxx xxx

(ii) all goods falling under Heading Nos. 2106, 25.04, 36.03, 40.11, 40.12, 40.13, 87.01, 87.02, 87.03, 87.04, 87.05, 87.06, 87.11, 91.01, 91.02 and 96.13.

(iii) xxx xxx xxx xxx xxx”

(iv) xxx xxx xxx xxx xxx

It is manifest from the above that goods falling under Heading No. 87.02 and 87.04 are not entitled to exemption from the levy of excise duty but the same is available to the goods falling under Heading 87.07. Heading No. 87.07 does not figure in the list of goods made exigible to excise duty. Goods covered by Heading No. 87.07 are, thus, exempt from the levy of excise duty. The bodies (including cabs) for the motor vehicles built by the petitioners are exempt from the payment of excise duty. The respondents are, however, insisting that the petitioners who are engaged in the business of building bodies over the chassis for trucks and buses is liable to pay excise duty at the rate of Rs. 4,000/- and Rs. 8,000/- respectively per body built. The Superintendent, Central Excise, Moga Range, vide letter, dated September 8, 1986 (Annexure P-10) wrote to the President of the Union/Association of body builders of truck/buses that by virtue of the amended notification, dated April 24, 1986, the body builders of trucks and buses had to pay excise duty of Rs. 4,000/- and Rs. 8,000/- per vehicle respectively. A similar letter was written to one of the petitioners on September 16, 1986 Annexure P-5, that since they are manufacturing bodies for trucks and buses, they have to take out a licence under the Central Excise Act and since they had not applied for the issuance of a licence, action will be taken against them for illegal manufacture of bodies for trucks and buses. Aggrieved, the petitioners have filed these writ petitions.

6. The respondents plead and contend that in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government amend the notification of the Government of India, Ministry of Finance (Department of Revenue) No. 162/86-Central Excise, dated March 1, 1986, whereby certain entries were inserted to the effect that public transport type passenger motor vehicles covered by Heading No. 87.02 or 87.04 are liable to pay excise duty at the rate Rs. 8,000/- per motor vehicle and the motor vehicles for transport of goods are liable to pay excise duty at the rate Rs. 4,000/- per motor vehicle. It is pertinent to mention that this notification does not in any way take away the exemption granted to bodies built for the motor vehicles included in Heading No. 87.07. The respondents further contend that the petitioners are not manufacturing separate identifiable unit articles in the form of bodies (which can come to the market for being bought and sold) designed to be mounted on public transport type motor vehicles or the motor vehicles for the transport of goods and, therefore, their activities are covered under Heading No. 87.02 or 87.04 of the said Schedule. They further argue that the petitioners manufacture complete motor vehicles on the chassis supplied by the customers and, thus, convert them into complete vehicles which fall under Heading Nos. 87.02 and 87.04. The bodies are not built separately. They are built on the chassis itself in a single integrated process and the chassis supplied by the customer is converted into a completely separate item, viz. a motor vehicle.

7. It is contended by Shri H. S. Brar, Advocate, learned senior standing counsel for the Union of India, that if the petitioners had manufactured the bodies as separate and independent units unconnected with and un-related to a chassis and had supplied or sold the same as a separate commodity or article of use, then by virtue of the provisions of the notification, dated March 1, 1986, the petitioners would have been exempt from the payment of excise duty and would not have been obliged to take licences; but since the petitioners built the bodies on the chassis, they, by manufacturing process, convert a chassis which is a separate independent unit capable of being sold and purchased, into an entirely different unit. After the fabrication of the body, the chassis becomes a motor vehicle capable of being used for the conveyance of passengers or carriage of goods, as the case may be. It does not remain a chassis. Thus, the manufacturing process of fabrication of body on the chassis partakes the character of manufacture of a motor vehicle, which may be used for purposes of carriage of passengers or movement of goods. The petitioners, therefore, are engaged in manufacturing the motor vehicles as envisaged by Heading Nos. 87.02 and 87.04 and are, thus, liable to pay excise duty on the motor vehicles which come into being after the petitioners’ undertaking the manufacturing process. The petitioners, it is contended, are thus liable to take licences also.

8. These submissions of Mr. Brar have not commended themselves to me. The petitioners run small scale units fabricating bodies for trucks and buses on the chassis supplied by the customers. They undertake simple building and fabricating processes. They are not licensed or equipped to manufacture motor vehicles. It is a matter of common knowledge that the motor vehicles, be they public-transport type or vehicles for movement of goods, are manufactured in large scale industrial units with investment of hundreds of crores of rupees. It is the petitioners’ case which has not been controverted by the respondents that the annual turn over of each of the petitioners does not exceed ten lakhs of rupees. So, none of the petitioners is in a position to manufacture motor vehicles.

9. ‘Motor vehicles’ is defined under Section 2(18) of the Motor Vehicles Act, 1939, to mean “any mechanically propelled vehicles adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a boy has not been attached and a trailer, but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises.”

10. A person who builds or fabricates a body on a chassis does not, from the notions of a common man, manufacture a motor vehicle. By fitting a body on a chassis the petitioners do not covert the same into a motor vehicle. The chassis which are manufactured by a large scale industrial unit under licence from the Government of India are the motor vehicles as commonly understood. In order to determine as to whether particular products or goods are exigible to tax or excise duty, the test commonly applied is : how is the product identified by the class or section by people dealing with or using the product. That is the test which is attracted wherever the statutes does not contain the definition of the product or the goods in question. (See Parrits and Spencers (Asia) Ltd. v. State of Haryana - [(1978) 42 S.T.C. 433]. It is by its functional character that a product is so identified. It is a matter of common experience that the identity of an article is associated with its primary function. When a consumer buys an article, he buys it because it performs specific functions for him. It is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind. It has also been held by the final Court in a catena of cases that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted. Applying these tests, the bodies build/fabricated by the petitioners on the chassis supplied by the customers cannot be termed to be motor vehicles. The petitioners do not proclaim or give out that they are manufacturing or selling motor vehicles. No person who wants to purchase a motor vehicle will go to the petitioners for this purpose, because the people in the transport business do not associate in their minds the body of the motor vehicle with the need which a motor vehicle supplies in real life. There are more than 500 body builders in the small State of Punjab. Such a large number of manufacturers of motor vehicles does not simply exist in the whole world. The people who think to purchase motor vehicles which they have to use for carrying passengers or transporting goods first purchase a chassis from the 4/5 large scale manufacturers. Then they commission the petitioners or other body builders to build/ fabricate body thereon. Thereafter they put the motor vehicle into use. But the owner of a chassis does not approach a body builder with a view to get a motor vehicle manufactured from him. The petitioners do not complete or manufacture whole of the motor vehicle. They add only a body to the chassis. They do not engage themselves in any fine sophisticated manufacturing process so as to earn the high sounding epithet of manufacturers of motor vehicles. They just build a part of a motor vehicle. A part cannot be equated with the whole. Motor vehicles manufacturers do not manufacture tyres. Tyres are an integral part of a motor vehicle. Even then a person who undertakes supplying and fitting tyres to a motor vehicle does not manufacture a motor vehicle. If the interpretation canvassed by the respondents is accepted, then each motor vehicle is manufactured many times. But it is not a fact. So, this interpretation cannot be accepted because it is not in consonance with logic and reality. The view I am taking is supported by the independent existence of Heading No. 87.07 on the statute book, which makes the bodies of motor vehicles independently exigible to excise duty. If process of manufacturing a body on a chassis had culminated in the manufacture of a complete and whole motor vehicle, then this entry would become redundant. Motor vehicles are already exigible to excise duty under Heading Nos. 87.02 and 87.04. It finds further sustenance from the fact that Heading Nos. 87.02 and 87.04 have been specifically excluded from the exemption clause in entry (4) of the notification, dated March 1, 1986. Thus, bodies of motor vehicles built by the petitioners are exempt from payment of excise duty.

11. Faced with this situation, Shri Brar argued that if the body had been fabricated separately as an independent unit and it had not been built on a chassis, then it would have been exempt from payment of excise duty, and there would have been no need for the manufacturer to take a licence. One fails to understand how the nature and character of a body changes when it is built on a chassis from a body which is built independently of a chassis and then fixed thereon. In both cases, the major process of manufacture is the same and the bodies have the same functional utility. The distinction drawn by the learned counsel between the two types of bodies mentioned above is without any merit and it simply does not exist. The large scale manufacturer who manufacturers a motor vehicle and a small scale entreperneurs with hardly a turnover of a million of rupees per year cannot be equated for the purposes of imposition of excise duty.

12. For the foregoing reasons, these writ petitions are allowed. The petitioners and other small scale manufacturers who only build or fabricate bodies for buses or trucks on the chassis supplied by their customers do not manufacture motor vehicles. They only manufacture bodies of motor vehicles and their cases are fully covered by Heading No. 87.07 and the notification exempting the goods, i.e., the bodies of the motor vehicles falling under this category. The petitioners whose annual turnover does not exceed Rs. 10 lakhs are not liable to pay excise duty or to get a licence under the Act. No costs.

Equivalent 1988 (34) ELT 631 (P & H)