Modvat credit on jack assemblies and limitation by valid provisional assessment were both decided in favour of the assessee.

Jack assemblies supplied with motor vehicles were treated as admissible Modvat inputs because they formed part of the sale package used in relation to manufacture and clearance of the final product. A mere RT-12 endorsement that assessment was provisional did not amount to a valid provisional assessment under Rule 9B, so the Department could not rely on it to defeat limitation. The notice was therefore time-barred. The demand was set aside with consequential relief.

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Issues: (i) Whether jack assemblies supplied with motor vehicles were eligible inputs for Modvat credit; (ii) whether the demand raised by the show cause notice was barred by limitation on the ground that the RT-12 endorsements did not amount to provisional assessment.

Issue (i): Whether jack assemblies supplied with motor vehicles were eligible inputs for Modvat credit.

Analysis: Jack assemblies were supplied along with the vehicles and were treated in trade practice as part of the sale package necessary for marketing the motor vehicles. The Tribunal followed its earlier view that jack assemblies were entitled to Modvat credit and accepted that such goods were used in relation to the manufacture and clearance of the final product. The earlier concession attributed to the assessee did not prevent reconsideration of the legal issue.

Conclusion: Jack assemblies were eligible for Modvat credit under Rule 57A.

Issue (ii): Whether the demand raised by the show cause notice was barred by limitation on the ground that the RT-12 endorsements did not amount to provisional assessment.

Analysis: Mere endorsement in RT-12 returns that assessment was provisional was held not to constitute a valid provisional assessment under Rule 9B. In the absence of a proper provisional assessment order, the Department could not treat the matter as kept open for limitation purposes. The Tribunal therefore rejected the plea that the notice was within time on the basis of provisional assessment.

Conclusion: The show cause notice was time-barred.

Final Conclusion: The assessee succeeded on both eligibility for credit and limitation, and the demand was set aside with consequential relief.

Ratio Decidendi: For Modvat purposes, jack assemblies supplied with motor vehicles were admissible as inputs used in relation to manufacture, and a mere RT-12 endorsement cannot amount to provisional assessment so as to defeat the plea of limitation.

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