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TMI Blog2010 (8) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... of tube within the tyre along with the flap and partly inflating the tube, does not make the transaction anything other than a transfer or sale in the same form - Rule 3(4) (Rule 3 (5) later) of the CENVAT Credit Rules squarely applies to the transaction - Tribunal's finding to the contrary is not sustainable – cenvat credit not available X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the respondent, they found that the tubes and flaps purchased by the respondent were sold by them at a lower value thereby causing loss of revenue in as much as CENVAT credit taken at the time of purchase of tubes and flaps is much more than the duty paid on resale of tubes and flaps. The department also found that Rule 3(4) of the CENVAT Credit Rules which was later substituted by Rule 3(5) of the CENVAT Credit Rules, squarely applies because tubes and flaps purchased and on which CENVAT credit is taken by the assessee were resold "as such" and, therefore, they are liable to pay the short-payment of excise duty i.e. the difference between CENVAT credit availed at the time of purchase of tubes and flaps and the duty paid on resale of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 9". (emphasis supplied) 4. The question of applicability of the Rule to the respondent will depend on the sole question as to whether the flaps and tubes purchased are removed "as such" from the factory on sale to the OE Manufacturers. Senior Standing Counsel appearing for the appellant contended that apart from packing the tube and flap inside the tyre, the respondent is not doing anything with the tube or flap after purchase. According to him, the goods namely, tubes and flaps after purchase ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tyres, tubes and flaps. The respondent-assessee also invoiced tyres, tubes and flaps separately, though there is single packing of one tube along with flap in each tyre manufactured and sold by the respondent. The Tribunal has held that since tubes and flaps have been cleared along with tyres as accessories, the tubes and flaps are not cleared "as such". We do not think the finding of the Tribunal can be sustained because the packing of tube within the tyre along with the flap and partly inflating the tube, does not make the transaction anything other than a transfer or sale in the same form. In order to justify an input tax credit, the respondent-assessee, ought to have used the item purchased as an input, whether it be accessory or not. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er along with the tyres manufactured and sold by them, does not entitle them to claim CENVAT credit at all. Therefore, in our view, there is no difference between the two transactions of the respondent-assessee i.e. purchase and resale of tubes and flaps along with tyres manufactured both in the replacement market and to the OE Manufactures for fixing in new vehicles. In both cases the respondent acts only as a trader in regard to purchase and resale of tubes and flaps and, therefore, Rule 3(4) (Rule 3 (5) later) of the CENVAT Credit Rules squarely applies to the transaction. The Tribunal's finding to the contrary, in our view, is not sustainable. Even though counsel for the assessee has relied on decisions in Commissioner of C. Ex. Pune-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the sale price of tubes and flaps supplied to OE Manufactures is the same, then the Department would have taken action in time. So much so, the extended period of limitation under Section 11A(1)(a) is applicable and, therefore, the finding of the Tribunal on this issue also is not sustainable. Consequently we allow the appeals by reversing the orders of the Tribunal and by restoring the adjudication orders demanding differential duty with interest. However, we do not think there is any scope for penalty because the claim happened to be made by the respondent-assessee on account of misunderstanding of law which found acceptance with the Tribunal. Consequently penalty levied will stand cancelled. X X X X Extracts X X X X X X X X Extracts X X X X
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