2016 (3) TMI 992 - AT - Central Excise

Entitlement to claim cenvat credit on barbed wire being accessory to the transmission tower - whether the said accessory falls in the definition of input as contained in Section 2(k) of the Cenvat Credit Rules, 2004? - Held that - All the conditions are fulfilled in this case inasmuch as barbed wire is essentially required for smooth operation of the transmission tower and secondly, as per the terms and conditions of the agreements, it is necessary for the company to supply barbed wire along with transmission tower and thirdly, the description list of the goods sold is attached with the invoice copy, which clearly shows that the value of the barbed wire has been included in the assessable value and the duty has been paid on the whole amount. Since all the conditions are fulfilled, therefore in my considered opinion, the respondent is entitled to the credit of duty paid on barbed wire as held in the case of Ultrapack 2005 (4) TMI 438 - CESTAT, BANGALORE . Further, as find that the respondent supplied barbed wire to all its customers and as per the terms and conditions of the agreement, the price of barbed wire is included in the assessable value. The learned counsel for the respondent placed reliance in the case of Coca-Cola India Pvt. Ltd. vs. CCE, Pune 2009 (8) TMI 50 - BOMBAY HIGH COURT wherein held that burden of service tax may be borne by the ultimate consumer and not by any intermediary and if the value of the input or input service has been included in the assessable value, then credit should not be denied - Decided in favour of assessee

Issues Involved:
1. Entitlement to Cenvat credit on barbed wire as an accessory to the transmission tower.
2. Definition and interpretation of 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004.
3. Applicability of judicial precedents cited by both parties.
4. Conditions for availing Cenvat credit.
5. Revenue neutrality and inclusion of barbed wire value in the assessable value.
6. Imposition of penalty in cases involving interpretation of statutory provisions.

Detailed Analysis:

1. Entitlement to Cenvat Credit on Barbed Wire:
The core issue is whether the respondent can claim Cenvat credit on barbed wire as an accessory to the transmission tower. The respondent argued that barbed wire, used as an anti-climbing device, is an accessory to the transmission tower and thus qualifies as an input under Rule 2(k) of the Cenvat Credit Rules, 2004. The department contended that barbed wire is not used in or in relation to the manufacture of the final product and does not qualify as an input.

2. Definition and Interpretation of 'Input':
Rule 2(k) of the Cenvat Credit Rules, 2004 defines 'input' to include "accessories of the final products cleared along with the final product." The Tribunal emphasized that the definition clearly encompasses accessories, which are supplementary parts enhancing the effectiveness or convenience of the main product. Judicial precedents, including Annapurna Carbon Industries Co. vs. State of Andhra Pradesh (AIR 1976 SC 1418) and M/s. Mehra Brothers v. Jt. Commercial Officer (1991 (51) E.L.T. 173 (S.C.)), were cited to support the interpretation that accessories, even if not essential, add to the convenience or effectiveness of the main product.

3. Applicability of Judicial Precedents:
The respondent relied on several judgments, including Jayshree Industries vs. CCE (1993 (63) ELT 492 (T)), Ultrapack vs. CCE, Hyderabad (2005 (192) ELT 540 (T)), and CCE, Surat vs. Bothra Exports Pvt. Ltd. (2006 (205) ELT 562 (T)), to argue that accessories supplied along with the main product qualify for Cenvat credit. The Tribunal agreed with the respondent's reliance on these precedents, noting that the conditions laid down in these cases were satisfied.

4. Conditions for Availing Cenvat Credit:
The Tribunal examined whether the conditions for availing Cenvat credit were met:
- The barbed wire is essential for the smooth operation of the transmission tower.
- It is supplied along with the transmission tower as per contractual agreements.
- The value of the barbed wire is included in the assessable value, and duty is paid on the total amount.

5. Revenue Neutrality and Inclusion in Assessable Value:
The respondent argued that the inclusion of barbed wire value in the assessable value and the payment of duty on the entire amount should entitle them to Cenvat credit. The Tribunal agreed, referencing the case of Coca-Cola India Pvt. Ltd. vs. CCE, Pune (2009-TIOL-449-HC-MUM), which held that if the value of input or input service is included in the assessable value, credit should not be denied.

6. Imposition of Penalty:
The respondent cited cases such as Sona Wires Pvt. Ltd. vs. CCE, Raipur (1996 (87) ELT 439 (T)) and Aquamall Water Solutions Ltd. vs. CCE, Bangalore (2003 (153) ELT 428 (T)) to argue against the imposition of penalties in cases involving interpretation of statutory provisions. The Tribunal did not explicitly address the penalty issue in the final decision but focused on the entitlement to Cenvat credit.

Conclusion:
The Tribunal concluded that the respondent is entitled to Cenvat credit on barbed wire as it qualifies as an accessory under Rule 2(k) of the Cenvat Credit Rules, 2004. All conditions for availing the credit were met, and the value of the barbed wire was included in the assessable value. The appeal of the Revenue was dismissed, and the decision of the Commissioner (Appeals) was upheld.

(Pronounced in Court on 27.1.2016)

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