2024 (12) TMI 1360 - AT - Central Excise

CENVAT Credit - inputs or not - bought-out items - denial on the ground that the bought-out items do not qualify as inputs under Rule 2(k) of the Credit Rules as they are stored at the gate only and no manufacturing activity is carried out on them - scope of SCN - Inclusion of value of the accessories on which CENVAT credit is availed in the assessable value of the motor vehicles cleared by the respondents - suppression of facts or not - extended period of limitation. Admissibility of CENVAT credit on certain bought out items purchased by the respondent and supplied along with the vehicles - HELD THAT - It is found that learned Commissioner correctly finds that the only requirement for the entitlement to avail CENVAT credit is that the inputs are capital goods must be received in the factory of manufacture of final products; the receipt of the inputs in the factory is not disputed and therefore credit is admissible. It is further found that relying on the decision of the Hon ble Supreme Court in the case of Mehra Brothers Vs Joint Commercial Officer 1990 (11) TMI 144 - SUPREME COURT learned Commissioner finds that the test as to verify whether an item is an accessory or part of the vehicle is whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty elegance or comfort for the use of the motor vehicle or as a supplementary or secondary to the main or primary importance and the other test may be whether a particular article or articles or parts can be said to be available for sale in an automobile market or shops or places of manufacture - the Commissioner applied this test and the provisions of the Rules and came to a conclusion that the items qualify to be parts or accessories . Scope of SCN - HELD THAT - The learned Commissioner rightly finds that the impugned items are either parts or accessories and therefore credit is admissible before 01.03.2011 or after 01.03.2011. Authorized Representative for the Revenue tried to explain during the hearing on the basis of a sample invoice that the value of the impugned accessories is not included in the assessable value of the motor vehicles. It is found that this submission is beyond the scope of the show cause notice and the grounds of appeal. Revenue s appeal is very clear that it is only on the grounds that learned Commissioner (Appeals) has not given any findings as to the impugned goods vis- -vis their admissibility to CENVAT credit. Therefore it is not open for the Revenue to set up a new case at this juncture. Inclusion of value of the accessories on which CENVAT credit is availed in the assessable value of the motor vehicles cleared by the respondents - HELD THAT - It is found that inclusion or otherwise of the value of the accessories on which CENVAT credit is availed in the assessable value of the motor vehicles cleared by the respondents is not the subject matter of the grounds of appeal. In view of the assertions by the adjudicating authority that such value of the accessories is included in the assessable value of the motor vehicles; the argument of the learned Authorized Representative does not succeed. As the Department has accepted the OIO dated 25.11.2013 and no proceedings have been initiated for further period it is not open for the Department to dispute the admissibility in the impugned case. Hon ble Apex Court in the case of S.S. Engineers 2023 (7) TMI 717 - SC ORDER held that Having regard to the fact that for the subsequent period the Department has taken a stand that the bought-out items are not entered in the factory and the Assessee has not claimed credit on them there is no case for adding their value in the assessable value and hence no proceeding need be initiated in the form of a show cause notice we find that for the previous period in respect of which this appeal arises the stand of the Department cannot be contrary to what has been stated above. Hence we do not find any merit in the appeal. Conclusion - Revenue s appeal upholding the Commissioner s order that allowed CENVAT credit on the disputed items dismissed.

Summary

Issues Involved:

1. Admissibility of CENVAT credit on bought-out items supplied with vehicles.
2. Definition and classification of "inputs" and "accessories" under CENVAT Credit Rules.
3. Allegation of non-speaking order by the Commissioner.
4. Inclusion of accessory value in the assessable value of final products.
5. Invocation of extended period of limitation.
6. Consistency in departmental stand on similar issues across different periods.

Detailed Analysis:

1. Admissibility of CENVAT Credit:
The core issue revolves around whether certain bought-out items, such as bolts, screws, washers, and other vehicle components, qualify for CENVAT credit. The Commissioner dropped the demand against the respondent, stating that these items are used in or in relation to the manufacture of vehicles and thus qualify as inputs under Rule 2(k) of the CENVAT Credit Rules. The Commissioner emphasized that the only requirement for availing credit is that the inputs or capital goods are received in the factory of manufacture of the final product, which was undisputed in this case.

2. Definition and Classification of "Inputs" and "Accessories":
The definition of "input" under Rule 2(k) of the CENVAT Credit Rules was pivotal. Before 01.03.2011, "input" included accessories cleared with the final product. Post-01.03.2011, the definition required that the value of accessories be included in the final product's value. The Commissioner applied the test from the Mehra Brothers case to determine whether items are accessories or parts, concluding that the items in question qualified as either parts or accessories.

3. Allegation of Non-Speaking Order:
The Revenue contended that the Commissioner did not provide specific findings on the nature of the items and their eligibility for credit. However, the respondent argued that the Commissioner had categorized the items as "accessories" and "spare parts" and used the term "etc." to indicate a comprehensive discussion. The Tribunal found that the Commissioner's order was sufficiently reasoned and did not warrant interference.

4. Inclusion of Accessory Value in Assessable Value:
The Revenue argued that the value of the accessories was not included in the assessable value of the vehicles, as evidenced by sample invoices. However, this argument was beyond the scope of the show cause notice and the grounds of appeal. The Tribunal noted that the Commissioner had found the value included in the assessable value, and the Revenue's new argument could not be entertained at this stage.

5. Invocation of Extended Period of Limitation:
The respondent contended that the demand was time-barred, as there was no suppression of facts. The department had prior knowledge of the respondent's practices, and the issue involved complex legal interpretations. The Tribunal agreed that the extended period could not be invoked due to the absence of suppression and set aside the demand for interest and penalty.

6. Consistency in Departmental Stand:
The respondent highlighted that for a subsequent period, the department accepted the admissibility of similar items for credit and did not appeal against that decision. The Tribunal held that the department could not take a contrary stand for the impugned period, citing the Supreme Court's decision in S.S. Engineers, which emphasized consistency in departmental positions across different periods.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the Commissioner's order that allowed CENVAT credit on the disputed items. The Tribunal found no merit in the Revenue's arguments and emphasized the importance of consistency in departmental actions and the correct application of CENVAT Credit Rules.