2013 (6) TMI 6 - HC - Central Excise

Cenvat Credit - Inputs - Tool Kits - Scope of Rule 2(k) - held that - The goods excluded are light diesel oil, high speed oil and motor spirit which are in the nature of consumables. The final product cannot be given restricted meaning so as to mean as the engine of the vehicle or the chassis but all things which are necessary to make the final product marketable. What is excluded is the fuel which is to be consumed for running of the vehicle. All goods which are part of the original equipment are entitled to Cenvat credit as per definition of 2(k)(i). Decisions in Tata Engineering & Locomotive Co. Ltd. 1994 (4) TMI 78 - HIGH COURT OF PATNA AT RANCHI distinguished. Confirming the decision of CESTAT in Bajaj Auto Limited v. Collector of Central Excise, Pune 1996 (10) TMI 117 - CEGAT, NEW DELHI cenvat credit allowed - decided in favor of assessee.

Issues:
1. Interpretation of Cenvat Credit Rules regarding inputs used in the manufacture of final products.
2. Validity of Cenvat credit availed on tool kits and first aid kits sold with two wheelers.
3. Application of precedent and rulings in determining the eligibility for Cenvat credit.
4. Consideration of judgments by higher courts in similar cases.
5. Relevance of tool kits and first aid kits as inputs under Cenvat Credit Rules.

Issue 1: Interpretation of Cenvat Credit Rules regarding inputs used in the manufacture of final products

The case involved a dispute over the interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004, specifically concerning the definition of "input" in relation to the manufacture of final products. The Tribunal analyzed the definition, which includes goods used directly or indirectly in the manufacturing process, and concluded that all goods necessary to make the final product marketable are entitled to Cenvat credit. The exclusion of consumables like fuel indicated a broad scope for what constitutes an input, extending beyond essential components like the engine or chassis to all items integral to the final product's marketability.

Issue 2: Validity of Cenvat credit availed on tool kits and first aid kits sold with two wheelers

The appellant contested the eligibility of tool kits and first aid kits, sold with two wheelers, for Cenvat credit under Rule 3(i) of the Cenvat Credit Rules, 2002. The Adjudicating Authority disallowed the credit, prompting the appeal. The Tribunal, however, upheld the credit availed by the respondent, citing statutory requirements under the Central Motor Vehicle Rules, 1989, which necessitate the provision of tool kits and first aid kits as accessories for vehicle manufacturing. Consequently, the Tribunal deemed both kits as inputs under the Cenvat Credit Rules, allowing the credit claimed by the respondent.

Issue 3: Application of precedent and rulings in determining the eligibility for Cenvat credit

The appellant argued against the Tribunal's reliance on earlier rulings and precedent, questioning the correctness of the interpretation applied. However, the Tribunal justified its decision by referring to judgments such as Bajaj Auto Limited v. Collector of Central Excise and Bajaj Tempo Limited v. Commissioner of Central Excise, which supported the inclusion of tool kits and first aid kits as inputs based on statutory requirements. The Tribunal's adherence to precedent and established rulings reinforced the validity of the credit availed by the respondent.

Issue 4: Consideration of judgments by higher courts in similar cases

The appellant sought to invalidate the Tribunal's decision by invoking a judgment of the Patna High Court, which had been affirmed by the Supreme Court, regarding the treatment of tool kits as inputs. However, the Tribunal differentiated the facts of the present case from the Patna High Court's decision, emphasizing the necessity for tool kits and first aid kits to be part of the vehicle before use. By aligning with the Larger Bench Order and Supreme Court decisions, the Tribunal dismissed the argument that the earlier judgment should bind the Tribunal in the current matter.

Issue 5: Relevance of tool kits and first aid kits as inputs under Cenvat Credit Rules

The crux of the dispute revolved around whether tool kits and first aid kits could be classified as inputs under the Cenvat Credit Rules. The Tribunal's analysis focused on the broad definition of "input" encompassing goods used in or in relation to the manufacture of final products. By establishing the necessity and marketability of these kits for the two-wheelers, the Tribunal concluded that they fell within the ambit of inputs, justifying the Cenvat credit availed by the respondent. The Tribunal's interpretation highlighted the essential role of these kits in the manufacturing process, reinforcing their classification as inputs under the Cenvat Credit Rules.

In conclusion, the High Court of Punjab & Haryana dismissed the appeal, upholding the Tribunal's decision to allow Cenvat credit on tool kits and first aid kits sold with two wheelers. The judgment emphasized the inclusive definition of inputs under the Cenvat Credit Rules, the statutory requirements mandating the provision of these kits, and the precedents supporting their classification as inputs. The comprehensive analysis of the issues involved reaffirmed the validity of the respondent's claim for Cenvat credit, underscoring the importance of these kits in the manufacturing process.

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