2012 (5) TMI 323 - AT - Central Excise

Cenvat credit - inputs - the tool kit and first aid kit are sold by the appellant along with final product and their cost is included in the same. - held that - input means and includes accessories of final product cleared along with final product. - the appellant had supplied the tool kit and first aid kit to the buyers as per statutory requirements under Central Motor Vehicle Rules, 1989 as accessories to be used in relation to the manufacture of vehicle. Thus, both tool kit and first aid kit in our view are squarely covered by the definition of input given under Section 2(k)(i) of Cenvat Credit Rules and that the appellant had rightly availed the cenvat credit in relation to tool kit and first aid kit. - Decided in favor of assessee.

Summary

Issues:
Disallowance of cenvat credit availed by the appellants under Rule 14 of Cenvat Credit Rules, 2004. Recovery of inadmissible cenvat credit amount and interest. Imposition of penalty. Interpretation of the definition of input under Rule 2(k)(i) of Cenvat Credit Rules, 2004. Whether tool kits and first aid kits sold along with two wheelers qualify as accessories eligible for cenvat credit.

Analysis:
The appeal was against the disallowance of cenvat credit by the Commissioner (Adjudication) and the subsequent recovery of the amount along with interest and penalty under Rule 14 of Cenvat Credit Rules, 2004. The appellant, engaged in manufacturing two-wheelers, had availed cenvat credit on tool kits and first aid kits sold along with the vehicles. The Department contended that the cenvat credit was not permissible under Rule 3(i) of Cenvat Credit Rules, 2002, leading to the issuance of a show cause notice and subsequent disallowance of credit for a significant amount. The appellant argued that the tool kits and first aid kits qualified as inputs under Rule 2(k)(i) of the Cenvat Credit Rules, 2004, as they were accessories cleared along with the final product, meeting the statutory requirements of Central Motor Vehicle Rules, 1989.

The key contention revolved around whether the tool kits and first aid kits sold with two-wheelers could be considered as accessories eligible for cenvat credit. The appellant maintained that these kits were necessary accessories as per the Central Motor Vehicle Rules, 1989, and thus fell within the definition of input under Rule 2(k)(i) of the Cenvat Credit Rules, 2004. The Tribunal examined the statutory requirements mandating the presence of tool kits and first aid kits in vehicles, concluding that these items were essential accessories for the vehicles' operation and maintenance. Relying on previous tribunal decisions, the Tribunal held that the appellant had correctly availed cenvat credit on these kits, overturning the Commissioner's order disallowing the credit, and setting aside the demand, interest, and penalty imposed.

In the detailed analysis, the Tribunal emphasized the statutory obligations regarding the inclusion of tool kits and first aid kits with vehicles, establishing them as necessary accessories for vehicle operation. The interpretation of the definition of input under the Cenvat Credit Rules, 2004, played a crucial role in determining the eligibility of these kits for cenvat credit. By aligning the presence of these kits with statutory requirements and previous tribunal decisions, the Tribunal ruled in favor of the appellant, allowing the appeal and overturning the disallowance of cenvat credit, along with the associated recovery and penalties.