1989 (4) TMI 218 - AT - Central Excise

Summary

Issues:
- Appeal against the order allowing MODVAT credit for Tool kits supplied with Mopeds
- Interpretation of Rule 57-A of the Central Excise Rules, 1944 regarding eligibility for MODVAT credit
- Determination of whether Tool kits are considered inputs for MODVAT credit under Rule 57-A

Analysis:
The appeal was filed against the order allowing MODVAT credit for Tool kits supplied with Mopeds. The appellants, manufacturers of Two Wheelers (Mopeds), availed MODVAT credit under Rule 57-A from 1-3-1986 onwards. A Show Cause Notice was issued questioning the eligibility of Tool kits as inputs for MODVAT credit. The Assistant Collector initially confirmed the eligibility of Tool kits for MODVAT credit, but the Collector of Central Excise disagreed and directed a review. The Collector (Appeals) ultimately held that Tool kits are not considered inputs for MODVAT credit under Rule 57-A.

The appellants argued that Tool kits are essential components supplied along with Mopeds and should be eligible for MODVAT credit. They contended that the provisions of Rule 57-A are broad enough to include Tool kits as inputs, emphasizing that the Tool kits are necessary for the functioning of the Moped and are not excluded under the Rule's explanation.

Upon careful consideration, it was noted that the Tool kits are bought out items by the appellants and are not integral parts of the Moped. The Tool kits are supplied as accessories and do not participate in the manufacturing process of the Moped. Although the Tool kits are stored in the Moped, they do not form a component part of it. As bought out items, the Tool kits undergo no process in the factory and are supplied along with the finished Moped. Therefore, it was concluded that Tool kits do not qualify as inputs for MODVAT credit under Rule 57-A as they are not used in or in relation to the manufacture of the final product, the Mopeds.

In light of the above analysis, the Tribunal rejected the appeal, upholding the decision of the Collector (Appeals) that Tool kits are not eligible for MODVAT credit under Rule 57-A.