2017 (11) TMI 597 - AT - Central Excise

CENVAT credit - deemed manufacture - imported automobile parts like spark plugs and ignition coils - Held that - sparking plug is a part of the engine and the engine is the essential part of the auto mobile industries. Engine cannot start without sparking plug. So, the sparking plug and ignition coils are the part of auto mobile industries as per the definition of the imported items. When the duty was accepted by the Department than the appellant is entitled to the Cenvat credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order in Original denying Cenvat credit on imported automobile parts.
- Whether 'spark plugs' and 'ignition coils' form part of vehicles and are eligible for Cenvat credit.
- Interpretation of 'deemed manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944.
- Applicability of Cenvat credit when duty is accepted by the Department.
- Precedent set by the case of CCE & Cus., Surat v. Creative Enterprises and its impact on the present case.

Analysis:
The appeal was filed against an Order denying Cenvat credit on imported automobile parts, specifically 'spark plugs' and 'ignition coils'. The appellant, engaged in manufacturing these parts, claimed Cenvat credit which was rejected by the Department. The dispute revolved around whether these parts fell under Sr. No.100 of the third schedule to the Central Excise Act, 1944, and whether the manufacturing processes amounted to 'deemed manufacture' as per Section 2(f)(iii) of the Act.

During the hearing, the appellant's counsel argued that as the manufacturing activity was undertaken and duty was paid on the final product, Cenvat credit should be allowed. On the other hand, the Department's representative supported the impugned order. The Tribunal analyzed the nature of 'spark plugs' and 'ignition coils', considering them essential parts of the automobile industry, particularly engines. Referring to the case law of CCE & Cus., Surat v. Creative Enterprises, the Tribunal highlighted that even if an activity does not strictly amount to manufacture but duty is levied, the credit cannot be denied solely on the grounds of lack of manufacturing.

Citing the precedent upheld by the Supreme Court, the Tribunal concluded that since duty was accepted by the Department, the appellant was entitled to Cenvat credit. Therefore, the impugned order was set aside, and the appeal was allowed. This decision emphasized the importance of duty acceptance by the Department in determining eligibility for Cenvat credit, aligning with established legal principles and precedents in similar cases.