2000(10)LCX0055

IN THE CEGAT, EASTERN BENCH, KOLKATA

Smt. Archana Wadhwa, Member (J) and Dr. S.N. Busi, Member (T)

HINDUSTHAN MOTORS LTD.

Versus

COMMISSIONER OF C. EX., CALCUTTA-II

Order No. A-1709/CAL/2000, dated 17-10-2000 in Appeal No. E/516/92

Cases Quoted

Mahindra & Mahindra Ltd. v. Collector — 1998(02)LCX0231 Eq 1999 (109) ELT 0739 (Tribunal) — Followed. [Para 13]

Sri Chakra Tyres Ltd. v. Commissioner — 1999(03)LCX0191 Eq 1999 (108) ELT 0361 (Tribunal) — Relied on... [Para 8]

Advocated By :   S/Shri S.K. Bagaria and J.P. Khaitan, Advocates, for the Appellant.

Shri V.K. Chaturvedi, SDR, for the Respondent.

[Order per : Archana Wadhwa, Member (J)]. - The issue involved in the present appeal is as regards the correct classification of the appellant’s product ‘Hindustan Drive-away Chassis’ (hereinafter referred to as DAC). According to the appellant the said DAC are properly classifiable as motor vehicles principally designed for the transport of the persons classifiable under heading 8703.00. On the other hand the Revenue’s contention is that the DAC is nothing but chassis fitted with engines and properly classifiable under Heading 87.06.

2. Before appreciating the submissions made by both the sides we set out the two contending entries as below :-

3. The ld. Advocate Shri S.K. Bagaria appearing for the appellant submits that the said model is a motor vehicle minus only the rear portion of its body. It is a mono or chassis-less construction suitably reinforced with longitudinal runners and floor board incorporating the front body shell with two front doors, partial overhead roof, bulk head, wing balances, bonnet, mud-guards, wind screen, front bumpers with overriders and front seat having deepwell sprung upholstery with rubberised coir, spring case and seat cushions.

3.2 The said model is self-propelled motor vehicle and consists of similar mechanical assemblies as in other motor vehicles minus only the rear portion of the body. The rear portion of the body is left open so that the ultimate customer may get the same fabricated depending upon the use to which the vehicle is intended to be put by him such as ambulance, station wagon, pick-up van etc.

3.3 Although, the word “Chassis” has been used in the nomenclature of the said model, as a matter of fact, it has no chassis frame at all and is a mono or unit construction also known as integral or chassis-less construction.

4. He further submits that the expression “Chassis” normally means frame consisting of two long side members of channel sections joined together by number of cross members and braces. The engine, transmission, body and other components are attached to such chassis and thus the whole stress and load remains on it. In this connection reference may be made to some well known and authoritative publications defining the expression “Chassis” and the same are as under :-

(a)     McGraw-Hill Dictionary of Scientific and Technical Terms (Page 333)

“1. A frame on which the body of an automobile or airplane is mounted.

 2. A frame for mounting the working parts of a radio or other electronic device.”

(b)     The Oxford English Reference Dictionary (Page 248)

“1. The base-frame of a motor vehicle, carriage, etc.

 2. A frame to carry radio etc. components.”

(c)      The New International Webster’s Comprehensive Dictionary of the English Language (Page 225)

“1. The frame and springs of a motor vehicle, also, all other mechanical parts of the car, including the wheels and motor. 2.  The landing gear of an aircraft, the wheels, floats or other structures which support the main weight of an airplane. 3. In radio : (a) the metal framework to which the tubes and other components of a receiver, amplifier, etc. are attached. (b) the assembled framework and components. 4. In coast artillery, a movable railway for running the top carriage of a gun into and out of firing position.”

(d)     Chambers Science and Technology Dictionary (Page 152)

“Rigid base on which electronic units or other electrical components are mounted; the main frame of a vehicle (as distinct from the body to which the engine, steering and transmission gear, wheels, etc., are attached. Vehicles in which a suitably reinforced steel body fulfills this function are sometimes called chassis-less, monocoque or unitized.”

(e)     Academic Press Dictionary of Scientific and Technology (Page 407)

“Engineering : Any major part or framework of an assembly to which other parts are attached, such as the frame upon which an automobile body is mounted or the frame on which the components of an electronic device, such as a radio, are mounted; usually the frame is designed to be connected to ground to reduce shock hazard and electrical noise.”

(f)      The Americal Heritage - Dictionary of the English Language, Third Edition

Chassis :

1.          The rectangular steel frame, supported on springs and attached to the axles, that holds the body and motor of an automotive vehicle.

2.          The landing gear of an aircraft, including the wheels, skids, floats and other structures that support the aircraft on land or water.

3.          The frame on which a gun carriage moves forward and backward.

4.          The framework to which the components of a radio, television, or other electronic equipment are attached.

(g)     Fundamentals of Motor Vehicle Technology by V.A.W. Hillier and F. Pittuck

“The chassis frame is the structural member to which the main components, such as engine, transmission and body are attached : i.e. it is the skeleton of the vehicle.”

5. From the aforesaid Shri Bagaria concluded that it would be evident that chassis is altogether a separate and different product. In so far as DAC is concerned, it is neither a chassis by itself nor it contains any separate chassis frame but is a motor vehicle designed for transport of persons (minus only the rear portion of the body). The rear portion of the body is left open to be got fabricated by the consumer as per its requirements.

6. If the rear portion of the body would have also been completed at the appellants’ factory, undisputedly, DAC would have been classifiable under heading No. 87.03 as a motor vehicle. Simply because the rear portion of the body was left open to be got fabricated by the consumer as per its requirements and needs. DAC does not and cannot cease to be a motor vehicle. Under Rule 2(a) of the Rules for Interpretation of the Central Excise Tariff, any reference in a heading to goods shall be taken to include a reference to those goods, incomplete or unfinished, provided that the incomplete or unfinished goods have the essential characters of a complete or finished motor vehicle and non-completion of simply the rear portion of the body does not make it anything other than a motor vehicle.

7. Shri Bagaria has also referred to the following authoritative books on motor vehicle technology in support of his above submissions.

(a)     Fundamentals of Motor Vehicle Technology by V.A.W. Hillier & F. Pittuck - In Chapter 69 of the book it has been inter alia stated as under :-

“About 1934, the development of the all-steel body made possible the elimination of a separate frame, the body shell being capable of withstanding the various frame stresses when suitably designed. This frameless or integral arrangement gives a stiff, light construction, which is particularly suitable for mass produced vehicles, and since 1945 most light cars have been built with this construction.”

(b)     Motor Vehicle Basic Principles by V.A.W. Hillier - in this book at page 82 it is inter alia stated as under :-

“The body used on most cars is a type called integral or frameless. This stiff all-steel body construction has the main components bolted directly onto it, so the absence of a separate frame results in a lightweight vehicle which is suitable for mass production.

Although the engine position, number of seats and size of boot dictates the basic form, the final shape and style is governed by the appeal it has to the buying public.”

(c)        Automotive Mechanics by Joseph Heitner

“Motor vehicles, both passenger and truck, are generally considered to be made up of two major assemblies, namely, a chassis and a body. The chassis contains all the major units necessary to propel the vehicle, direct its motion, stop it, and allow it to run smoothly over uneven surfaces. In a unit frame and body design it is difficult to separate chassis from body.

The chassis of a late model passenger car is shown in Fig. 1-2. The frame is a rigid structure that forms a skeleton to hold all the major units together. The engine (shown in greater detail in Fig. 1-3) is mounted in the forward end of the frame and is connected to the clutch and transmission unit to form a compact power assembly. The unit is fastened to the frame through rubber-cushioned motor mounts to lessen the transfer of engine vibration. The transmission is connected to the final drive gears through the propeller shaft and universals. The final drive gears and differential are enclosed in a housing that is integral with a rearaxle housing, which in turn is attached to the frame through the rear springs. The two axles leading from the differential to the rear wheels revolve inside the rearaxle housing.

The wheels and tire assemblies support the frame and the units attached to it, through the front and rear suspension systems so as to allow the wheels and tires to follow the road irregularities without abnormally raising the frame or transmitting shock to it. The suspension system is made up of shock absorbers, and linkage.

8. Shri Bagaria has further contended that the goods in question were all along classified by the central excise authorities under Heading 87.03. No evidence has been produced by the Revenue in support of change of classification, for which burden lies upon them. In any case submits the ld. Advocate that the differential duty now confirmed against them by the authorities below is required to be deducted from the total realisation for determination of the assessable value, in view of the law laid down by the Larger Bench of the Tribunal in the case of Sri Chakra Tyres Ltd. & Ors. v. CCE - 1999(03)LCX0191 Eq 1999 (108) ELT 0361 (T) = 1999 (032) RLT 1.

9. Shri V.K. Chaturvedi, ld. SDR appears for the Revenue and reiterates the reasoning of the authorities below. From the photocopies submitted by the appellant it is contended that the DAC in question cannot be considered as a motor vehicle for transportation of persons. It is also an admitted fact on record that the rear portion of the body is yet to be fabricated and the vehicle in question cannot be called a complete car. The appellants have themselves described the goods in question as chassis in their various documents including the sale documents. As such it has been strongly contended that DAC would be properly classifiable under Heading 87.06. As regards the appellants’ submission that in any case the duty now being demanded is liable to be deducted from the total realisation made by the appellant so as to arrive at the correct assessable value. Shri Chaturvedi leaves the matter to the Bench.

10. We have considered the submissions made from both the sides. Heading No. 87.03 covers motor cars and other motor vehicles principally designed for the transport of persons. Admittedly the goods in question are not complete motor cars, neither are they complete motor vehicles. The appellants in their written submissions have themselves submitted that if the rear portion of the body would have also been completed at the appellants’ factory, undisputedly DAC would have been classifiable under Heading No. 87.03, as a motor vehicle. The question to be decided here is not as to how the goods would have been classified, if they would have been completed at the appellants’ factory itself. The goods have to be classified according to their condition in which they leave the manufacturer’s factory. The DAC when cleared from the appellants’ factory were admittedly not complete motor vehicles or complete cars and the same could not be used for transportation of persons. The rear portion of the DAC was yet to be fabricated and even as per the appellants the same is fabricated by their customers as per their own requirements and the DSE in question may ultimately get converted into station wagon, ambulance, etc., after suitable body fabrication on the rear portion according to the needs of the concerned customer. From a common man’s point of view also the said incomplete DAC cannot be considered to be a motor vehicle for transport of persons. As rightly observed by the Asstt. Commissioner no person who wants to purchase a motor vehicle will go to the assessee to collect the said DAC without a body made or fabricated on the same. As such we are of the firm view that the DAC in question will not get covered by Heading No. 87.03 which includes complete motor cars and other motor vehicles principally designed for the transport of persons.

11. Now the question which arises is that if the DAC in question is not classifiable as a motor vehicle under Heading 87.03, whether the same would be falling under Heading 87.06 as chassis fitted with engines for the motor vehicles of Heading Nos. 87.01 to 87.05. Sub-heading 8706.30 covers the chassis for the vehicles of Heading No. 87.03. Inasmuch as DAC is not a complete car, as already observed by us the same would be appropriately classifiable as chassis for the vehicles of Heading No. 87.03. The attempt made by the ld. Advocate to show that the DAC in question has been manufactured in accordance with modern technology without the chassis having come into existence and the differentiation attempted by him between the motor vehicles and the chassis fitted with engines is not convincing. Merely because the developments of technology has made it possible the elimination of a separate frame and the creation of the body shell capable of withstanding the various frames traces it cannot be said that a chassis-less motor vehicle has come into existence. The various technical books relied upon by the appellants only show that the motor vehicles can be manufactured in a unit frame and body designed and it is difficult to separate chassis from the body. Nevertheless the DAC in question or any motor vehicle manufactured according to the developed technology, it cannot be said that the chassis containing of the major units necessary to propel the vehicle, which directs its motion, stop it and allow it to run smoothly over uneven surfaces, is absent. The latest technology only make it possible for the manufacturers to make the chassis along with bodies in one go instead of first making the chassis and fabricating bodies over the chassis. However, inasmuch the goods in question are not complete motor vehicles so as to justify their classification under Heading 87.03, we hold that the same would be classifiable under Heading No. 87.06.

12. Even the definitions referred to by the ld. Advocate from the various technical authorities are to the effect that the chassis is a frame on which an automobile or airplane is mounted. Admittedly the body of the vehicle has not been fabricated on DAC in question, which is done by the customers in the present case. Merely because the front portion of the vehicle meant for the driver has been given shape and overhead roof will not convert the said DAC into a complete motor vehicle. The appellants have contended that the chassis only provide a wooden single seat, a temporary arrangement, to facilitate driving of the vehicle whereas in DAC there is front seat having deepwell spring upholstery. In our view this difference of providing wooden seat or upholstered seat or driving of the chassis will not alter the character of the chassis. In many of the chassis meant for trucks, etc., the cabin is provided for the driver. Similarly the difference drawn by the appellant that in DAC the stiff all steel body of the vehicle carry itself the total stress of loads and all components or sub-assemblies are directly fitted to such body, whereas the total stress and loads remain directly on the chassis frame, whereupon all major assemblies or sub-assemblies are mounted by bolting/welding will not convert the product in question into a motor vehicle inasmuch as the said difference pointed out by the ld. Advocate only represent the old concept and style of manufacture of chassis and the modern advanced technical concept. We also find that the general manager of the appellants company in his certificate dated 13-5-1991 has referred to DAC being a mono construction type of structure suitably reinforced with longitudinal runners and floor board incorporating front body shell, bulk head, wing balance etc. and saying that the same does not have a separate chassis frame. However, as already observed absence of a separate chassis frame will not convert DAC into a complete motor vehicle inasmuch as admittedly the functions of a chassis are performed by the said DAC, as per the definition of chassis, etc.

13. We also find that the chassis have been defined by the federal department of transport Australia in its Australia designed rules, 3rd Edition as follows :- [As noted by the Tribunal in the case of Mahindra & Mahindra Ltd. - 1998(02)LCX0231 Eq 1999 (109) ELT 0739 (T)].

CHASSIS - The basic operating motor vehicle including engine frame and other essential structural and mechanical parts, but exclusive of body and appurtenances overall accommodation of driver, property and passenger appliances or equipment related other than control.

As in the instant case the DAC in question is exclusive of body, but for the front drivers portion, the same would be covered by the definition of chassis.

14. It is also seen that Heading 87.03 is in respect of motor vehicles principally designed for the transport of persons. Inasmuch as the rear portion of the body has not been built by the appellants and the DAC in question can be converted into any type of vehicle by fabrication of rear portion of the body, it cannot be said, at the stage of clearances of the DAC from the appellants’ factory that the same would be definitely converted into a vehicle designed for the transport of persons. Theoretically, the DAC can be converted into vehicles meant for transportation of goods also or for any other purposes. As such looking at the dispute from any angle, it cannot be said that the DAC is a motor vehicle meant for the transport of the persons, in the condition in which they are cleared from the appellants’ factory.

15. We also note that the appellants have been themselves describing the product as drive away chassis in the various documents. In fact the said item is being sold by them as a chassis to their customer. Chassis numbers are being given on the vehicle in question and the same are being reflected in gate passes as also in various other documents. The appellants’ explanation that such chassis numbers are mentioned only for identification purposes is self-contradictory. On one hand the appellants are contending that there is no chassis on the DAC in question and on the other hand numbers are being provided by them. In fact the appellants are themselves calling the goods in question as drive away chassis indicating that the same are not motor vehicles but are only chassis for the motor vehicles to be fabricated on the same.

16. In view of our foregoing discussions that DAC are properly classifiable as chassis under Heading 87.06.

17. However, we agree with the submissions of the ld. Advocate that in view of Larger Bench decision of the Tribunal in the case of Sri Chakra Tyres - 1999(03)LCX0191 Eq 1999 (108) ELT 0361 (T) = 1999 (032) RLT 1, the amount of differential duty now being confirmed against the appellant is required to be deducted from the overall realisation made by them from their customers for the purpose of assessable value and the demand is required to be re-quantified accordingly. We direct the lower authorities to do so and remand the matter for re-quantification of demand.

18. As a result appeal is rejected subject to re-quantification of demand.

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Equivalent 2001 (130) ELT 0513 (Tri. - Kolkata)

Equivalent 2000 (041) RLT 0692