2017 (3) TMI 637 - AT - Central Excise

CENVAT credit - whether the appellant is entitled to avail cenvat credit on saree guard which have been attached to the vehicle cleared by the appellant? - Held that - the appellant is under a statutory obligation to sale the motor cycle with the provisions of the saree guard covering not less than half of the rear wheel so as to prevent the clothes of the person sitting on the pillion from being entangled in the wheel, therefore, without saree guard, the specified item cannot be sold by the appellant as per Note 6 to Section XVII of the Central Excise Tariff Act, 1985 - Without saree guard, the vehicle will remain incomplete and the same cannot be said to the finished goods ready for sale - the appellant is entitled to avail cenvat credit on saree guard - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of cenvat credit on saree guards under the Cenvat Credit Rules, 2004.

Analysis:
The appellant, engaged in manufacturing scooters and motorcycles, availed cenvat credit on saree guards but faced denial by the Revenue, leading to initiation of proceedings. The core issue revolved around whether saree guards qualify as inputs under the Cenvat Credit Rules, 2004. The appellant contended that as per Rule 123 of the Central Motor Vehicle Rules, 1989, they were obligated to supply motor vehicles with protective devices like saree guards to prevent entanglement of pillion riders' clothes in the rear wheel. The appellant argued that without saree guards, vehicles could not be sold as finished goods, making them essential for marketability. Citing a previous Tribunal decision, the appellant claimed entitlement to cenvat credit on saree guards.

The Revenue, however, maintained the stance taken in the impugned order, leading to the matter being brought before the Appellate Tribunal CESTAT CHANDIGARH. The Tribunal analyzed Rule 123 of the Central Motor Vehicle Rules, 1989, which mandated the inclusion of protective devices like saree guards on motor vehicles. The Tribunal noted that without saree guards, vehicles would be incomplete and not marketable as finished goods, aligning with Note 6 to Section XVII of the Central Excise Tariff Act, 1985. Referring to a previous Tribunal case, the Tribunal highlighted that items like mirror assembly, saree guard, and tool kit were essential for marketability and had been allowed cenvat credit in a similar context.

Ultimately, the Tribunal ruled in favor of the appellant, holding that they were entitled to avail cenvat credit on saree guards. The impugned order denying cenvat credit was set aside, and the appeal was allowed with consequential relief, if any. The decision was based on the statutory obligation to include saree guards for marketability and the precedent set by previous judgments allowing cenvat credit on essential items for making final products marketable.