2023 (10) TMI 1082 - AT - Central Excise

CENVAT Credit - inputs - purchase of tubes and flaps from other manufacturers and clearing the same along with the tyres to the original equipment manufacturers and overseas purchasers - Penalty of company and directors. It is the contention of the Department that the said tubes and flaps are not used in the manufacture of the tyres and as such do not qualify to be inputs in view of the definition given under Rule 2(k) of CCR, 2004. HELD THAT - It is seen that the definition of Inputs as above has a wider connotation and the inputs can be used directly or indirectly and may or may not be contained in the final product. Moreover, they can also be accessories of the final products cleared along with the final products. It is not the case of the Department that these inputs fall under any exclusion clause of the definition. The Courts and Tribunals have been consistently holding that the definition of Inputs is wide and comprehensive. There are number of decisions in favour of the appellants in cases with identical facts. Only one decision of Hon ble Kerala High Court is against the appellants and the same is relied upon in the impugned order. Learned Counsel for the appellants submits that Hon ble Apex Court 2011 (11) TMI 881 - SC ORDER has stayed the operation of the said decision, of the Hon ble Kerala High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS APPOLLO TYRES LTD. 2010 (8) TMI 287 - KERALA HIGH COURT . Even after the decision of Hon ble Kerala High Court in the above case, Tribunal has been consistently holding that the credit of tubes and flaps is admissible for the manufacturers of tyres. The appellants are eligible to avail CENVAT credit on flaps and tubes cleared in a set packing along with the tyres manufactured by them. It is further found that Department s objection that the assessable value of tubes and flaps is separately shown in the invoices and therefore, CENVAT credit is not available, is not acceptable. Penalty of company and directors - HELD THAT - As the credit is admissible on merits, penalty imposed on the company and the Directors is not sustainable. The impugned order is set aside - Appeal allowed.

Summary

Issues involved:
The eligibility of the appellants for CENVAT credit on tubes and flaps supplied along with tyres in a set packing.

Summary:

Issue 1: Eligibility of CENVAT credit on tubes and flaps
The appellants contended that tubes and flaps are covered under the definition of "Input" under Rule 2(k)(i) of CCR, 2004, as they are used in or in relation to the manufacture of final products. They argued that the Department cannot take different stands for different periods and cited various cases in support of their contentions. The Department, however, claimed that the tubes and flaps are not used in the manufacture of tyres and thus do not qualify as inputs. They also alleged that the appellants did not inform the Department about availing CENVAT credit on tubes and flaps.

Issue 2: Interpretation of Rule 2(k) of CCR, 2004
The Tribunal analyzed Rule 2(k) of CCR, 2004, which defines "input" broadly to include goods used directly or indirectly in the factory by the manufacturer of the final product, or as accessories cleared along with the final product. The Tribunal noted that the definition of inputs is wide and comprehensive, and there are several decisions in favor of the appellants with similar facts. They highlighted that the Department had previously decided in favor of the appellants for a specific period, which had not been appealed, and thus the issue had attained finality.

Conclusion:
The Tribunal held that the appellants are eligible for CENVAT credit on tubes and flaps supplied along with tyres. They found that the Department's objection regarding the separate value of tubes and flaps in invoices was not valid based on precedents. Consequently, the penalty imposed on the company and directors was deemed unsustainable. The impugned order was set aside, and all three appeals were allowed.

*(Pronounced on 20/10/2023)*