2012 (9) TMI 884 - AT - Central Excise

CENVAT Credit - Whether the appellant would be eligible for cenvat credit in respect of Sari Guard and Mirror Assembly cleared along with motor cycles - Held that - Sari Guard is an essential safety component of a motor cycles. As regards the Mirror Assembly we are of the view of that the same is also a safety component of a motor cycle. As such, prima facie the said items are covered under the definition of Accessories to the motorcycles and, therefore, they fall within the definition of input . That being the case, prima facie the appellant has rightly availed cenvat credit in respect of the excise duty paid on Sari Guard and Mirror Assembly . Thus we are of the opinion that appellant has been able to make out a prima facie case for waiver of the condition of pre-deposit of duty demand, interest and penalty - Stay granted.

Summary

Issues:
1. Eligibility for cenvat credit on "Sari Guard" and "Mirror Assembly" cleared along with motor cycles.

Analysis:
The Appellant, a manufacturer of two-wheelers, cleared motor cycles fitted with "Sari Guard" and "Mirror Assembly" by paying excise duty calculated on the transaction value inclusive of these components. The main issue was whether the Appellant could claim cenvat credit for these items. The Department contended that these items did not qualify as 'inputs' under Rule 2(k) of the Cenvat Credit Rules, 2004, leading to a show cause notice demanding the disallowance of cenvat credit availed by the Appellant along with penalties. The Commissioner upheld this demand. The Appellant appealed against this decision, seeking a waiver of the pre-deposit condition.

The Appellant argued that "Sari Guard" and "Mirror Assembly" were safety devices mandated by the Central Motor Vehicles Rules, making them accessories to the final product, i.e., motorcycles, and thus falling within the definition of 'inputs.' On the other hand, the Revenue opposed the stay application, asserting that these components did not meet the criteria for 'inputs.' After considering the submissions, the Tribunal examined the relevant Motor Vehicles Rules, which highlighted the necessity of safety devices for drivers, passengers, and road users, including requirements for rear view mirrors and protective devices. The Tribunal concluded that both "Sari Guard" and "Mirror Assembly" were essential safety components of motorcycles, categorizing them as accessories to motorcycles and, therefore, falling under the definition of 'inputs.'

Consequently, the Tribunal found that the Appellant had a prima facie case for the waiver of the pre-deposit condition for the cenvat credit, interest, and penalty. As a result, the Tribunal dispensed with the pre-deposit condition and allowed the stay application, halting the recovery of the cenvat credit demand, interest, and penalty until the appeal's final disposal. The appeal was scheduled for further proceedings.