1997 (3) TMI 219 - AT - Central Excise

Issues Involved:

1. Disallowance of Modvat credit on motor vehicle seats.
2. Classification and intermediate product status of motor vehicle seats.
3. Applicability of Rule 57C and Rule 57F(2) of the Central Excise Rules.
4. Alleged non-declaration of inputs under Rule 57G.
5. Constitutional argument under Article 14 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Disallowance of Modvat Credit on Motor Vehicle Seats:

The appeals arose from adjudication orders disallowing Modvat credit on duty paid for inputs used in motor vehicle seats. The Department's stance was that motor vehicle seats are final products, chargeable to nil duty under Heading 9401.00 of the Central Excise Tariff Act, 1985, read with Notification 80/90, and thus hit by Rule 57C of the Central Excise Rules. The Department also argued that the seats are not intermediate goods for motor vehicles.

2. Classification and Intermediate Product Status of Motor Vehicle Seats:

The appellants, licensed under Central Excise for manufacturing motor vehicles classified under Heading 87.03 of CETA, 1985, claimed Modvat credit for parts of motor vehicle seats. The Department issued show cause notices alleging that motor vehicle seats are final products and not intermediate goods. The Tribunal found that the seats are essential parts for motor vehicles, and their manufacture is complete only with the fitment of the seats. Thus, seats are intermediate products for the appellants. The Tribunal referenced previous decisions, including the Larger Bench decision in Ashwin Vanaspathi Ltd. v. CCE, which held that intermediate products used in the manufacture of final products remain eligible for Modvat credit under Rule 57D.

3. Applicability of Rule 57C and Rule 57F(2) of the Central Excise Rules:

The Tribunal held that Rule 57C, which disallows Modvat credit if the final product is exempt from duty, does not apply as the seats are intermediate products. The Tribunal also found that the appellants had obtained the requisite permission under Rule 57F(2) for sending out inputs for motor vehicle seats and getting back the manufactured seats, thus complying with the Rule.

4. Alleged Non-Declaration of Inputs under Rule 57G:

The Department alleged that the appellants had not declared certain inputs in their Modvat declaration, violating Rule 57G. The Tribunal examined the appellants' statements and found that the descriptions in the declaration covered the inputs listed in the show cause notice. Minor variations in part numbers were deemed insufficient to warrant denial of Modvat credit. The Tribunal consistently held that minor variations in descriptions are not fatal to Modvat claims.

5. Constitutional Argument under Article 14 of the Constitution of India:

The Collector's order invoked Article 14, arguing that allowing Modvat credit for manufacturers of motor vehicles but not for manufacturers of motor vehicle seats alone would result in discrimination. The Tribunal rejected this argument, stating that Article 14 contemplates comparison of similarly placed persons, and the Collector was comparing dissimilarly placed entities. The Tribunal noted that Rules 57D(2) and 57F(2) were enacted to address such issues.

Conclusion:

The Tribunal concluded that motor vehicle seats are intermediate products for the appellants, and Rule 57C does not apply. The appellants had the requisite permission under Rule 57F(2), and the minor variations in part numbers did not constitute a violation of Rule 57G. The appeals were allowed, and the impugned orders were set aside, granting consequential relief to the appellants in accordance with the law.

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