Mandatory accessories supplied with vehicles can qualify as inputs for Cenvat credit when cleared with the final product.

Tool kits and first aid kits supplied with two-wheelers were treated as inputs for Cenvat credit because they were cleared along with the vehicle, their cost formed part of the sale price, and they functioned as mandatory accessories required for lawful use of the vehicle. Rule 2(k)(i) of the Cenvat Credit Rules, 2004 was applied to include accessories of the final product cleared with it, and the demand, interest, and penalty were held not sustainable. The principle stated is that goods supplied with the final product as legally required accessories, and used in relation to its manufacture and clearance, fall within the definition of input for credit purposes.

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Issues: Whether tool kit and first aid kit supplied along with two-wheelers qualify as "input" eligible for Cenvat credit under the Cenvat Credit Rules, 2004.

Analysis: Rule 2(k)(i) of the Cenvat Credit Rules, 2004 defines input to include accessories of the final product cleared along with the final product. The kits were sold along with the two-wheelers and their cost formed part of the sale price. Rule 138 of the Central Motor Vehicles Rules, 1989 requires the vehicle to carry the prescribed tool kit and first aid kit, making them mandatory accessories for use with the vehicle. On that basis, the kits were treated as accessories of the final product and as goods used in relation to the manufacture and clearance of the vehicle.

Conclusion: The tool kit and first aid kit were held to be covered by the definition of input, and Cenvat credit was rightly availed by the assessee.

Final Conclusion: The demand, interest, and penalty could not be sustained, and the assessee succeeded on merits.

Ratio Decidendi: Goods supplied along with the final product as mandatory accessories required by law and cleared with the product fall within the definition of input for Cenvat credit purposes.

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