The 3-Member Bench of the Tribunal has held that packing or repacking of parts, component and assemblies of earth moving equipment would not amount to deemed manufacture under Section 2(f)(iii) of the Central Excise Act, 1944 read with the Third Schedule thereof, for the period prior to 29 April 2010.

The Larger Bench in this regard held that Serial No. 100A of the Third Schedule to the Central Excise Act, 1944, which was inserted retrospectively w.e.f. 29 April 2010 by the Finance Act, 2011, would have effect only from 29 April 2010 and not from any date prior to this date.

The case involved demand of Central Excise duty on packing or repacking of parts, components and assemblies of wheeled tractor loader backhoe and hydra cranes, hydraulic excavator loader (backhoe loaders), hydraulic loader (wheel loading shovel/shovel loaders), and road rollers (compactors), for the period prior to 29 April 2010.

The Tribunal for this purpose noted that if earth moving equipment were already included in the description of goods described as ‘automobiles’ in Serial No. 100 prior to 29 April 2010, there would have been no necessity to add Serial No. 100A. It found it difficult to comprehend that the change would be applicable prior to 29 April 2010, more particularly when it was already given a retrospective effect.

It also noted that the date 29 April 2010 was not an artificial date since it brought Sl. No. 100A of the Third Schedule in conformity with Sl. No. 109 of Notification No. 19/2010-C.E. (N.T.), dated 29 April 2010 issued under Section 4A of the Central Excise Act, relating to valuation of excisable goods with reference to retail sale price. Reliance, in this regard, was also placed on Budget speech of the Finance Minister delivered in 2011.

The Tribunal also observed that the change imposed a new burden of levy w.e.f. 29 April 2010 and it could not by any stretch of imagination be said that it was intended to remedy a situation or make the position more explicit which was otherwise implicit.

Earth-moving equipment not covered as ‘automobiles’

Further, observing that when a word is not defined in the Act, ordinary meaning/common meaning is relevant and dictionaries can be referred to for ascertaining its meaning, the Tribunal held that the earth moving construction equipment cannot be termed as ‘automobiles’ merely because they move on roads or that they have attachment to execute and move earth from one place to another.

It noted various CBIC Circulars clarifying that ‘automobiles’ are conveyances for transportation of passengers, and goods on roads classifiable under Chapter 87 of the Central Tariff Act, and that earth digging and earth loading machinery are covered under Chapter 84 and cannot be treated as ‘automobiles’.

The Larger Bench in its decision dated 6 June 2023 [Action Construction Equipment Ltd. v. Commissioner] rejected the contention of the Revenue department that all construction equipment vehicles falling under ETH 8429 will fall under category of ‘automobiles’, as they have the essential automobile features provided under ETH 8705 in terms of the Explanatory Notes to HSN and because the expression ‘self-propelled’ used in ETH 8429 is synonymous with self-moving vehicles i.e. automobiles.

Further, observing that the definition of a word described in one statute cannot mechanically be applied to another statute, the Tribunal rejected Department’s reliance on the Motor Vehicle Act and the Air (Prevention and Control of Pollution) Act, 1981, to understand the meaning of ‘automobile’.