1996 (10) TMI 117 - AT - Central Excise

Summary

Issues Involved:
1. Admissibility of Modvat credit for hand tools, Argon gas, packing materials, caustic soda, and steel articles.
2. Whether Tool Kits and Jack Assembly supplied with vehicles qualify as "inputs" u/s Rule 57A of Central Excise Rules, 1944.
3. Whether Tool Kits and Jack Assembly fall under the exclusion Clause (i) of Explanation to Rule 57A.

Summary:
Issue 1: Admissibility of Modvat Credit
M/s. Bajaj Auto Ltd. (BAL) and M/s. Mahindra & Mahindra (MAM) were denied Modvat credit by the Assistant Collector for hand tools, Argon gas, packing materials, caustic soda, and steel articles. The Collector (Appeals) allowed credit for Argon gas, packing materials, caustic soda, and steel articles but confirmed disallowance for hand tools. BAL and MAM filed appeals against these decisions.

Issue 2: Tool Kits and Jack Assembly as "Inputs"
The core dispute revolves around whether Tool Kits and Jack Assembly, which are bought out items and supplied along with vehicles, qualify as "inputs" u/s Rule 57A of the Central Excise Rules, 1944. BAL and MAM argued that these items are essential for the marketability of the vehicles, as they are included in the assessable value and duty is paid accordingly. Lower authorities denied Modvat credit, stating these items are not "inputs" used in the manufacture or in relation to the manufacture of vehicles.

Issue 3: Exclusion Clause (i) of Explanation to Rule 57A
The Tribunal considered whether Tool Kits and Jack Assembly fall under the exclusion Clause (i) of Explanation to Rule 57A, which excludes "machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products." The Tribunal concluded that these items do not fall within this exclusion as they are not used for producing or processing any goods or bringing about any change in any substance in relation to the manufacture of the final products.

Detailed Judgment:
The Tribunal referred to various precedents, including the Supreme Court decisions in Jay Engineering Works Ltd. and Eastend Paper Industries Ltd., which supported the notion that items necessary for making the final product marketable should be considered as "inputs." The Tribunal also noted the statutory requirement under Motor Vehicle Rules mandating the inclusion of Tool Kits and Jack Assembly with vehicles, reinforcing their necessity for marketability.

The Tribunal held that:
1. Tool Kits and Jack Assembly are "inputs" used in relation to the manufacture of motor vehicles as per Rule 57A.
2. These items do not fall under the exclusion Clause (i) of Explanation to Rule 57A.
3. MAM is entitled to avail Modvat credit for the excise duty paid on these items.

Conclusion:
The appeals were allowed, and the orders of the lower authorities were set aside, affirming the entitlement of MAM to Modvat credit for Tool Kits and Jack Assembly supplied with motor vehicles.