2013 (1) TMI 612 - AT - Central Excise

Tribunal allows Cenvat credit for tool/first aid kits sold with two wheelers

The Tribunal held that tool/first aid kits sold with two wheelers qualify as inputs eligible for Cenvat credit. The kits were deemed necessary accessories ... Definition of 'input' under Rule 2(k)(i) of Cenvat Credit Rules, 2004 - accessories of the final product cleared along with the final product - Cenvat credit on inputs - mandatory equipment under Rule 138 of Central Motor Vehicle Rules, 1989Definition of 'input' under Rule 2(k)(i) of Cenvat Credit Rules, 2004 - accessories of the final product cleared along with the final product - mandatory equipment under Rule 138 of Central Motor Vehicle Rules, 1989 - Cenvat credit on inputs - Tool kits and first aid kits sold along with two wheelers are inputs eligible for Cenvat credit under the definition in Rule 2(k)(i) of the Cenvat Credit Rules, 2004. - HELD THAT: - Rule 2(k)(i) defines 'input' to include accessories of the final product cleared along with the final product. The tool/first aid kits were indisputably sold along with the motorcycles and their cost included in the sale. Rule 138 of the Central Motor Vehicle Rules, 1989 makes it obligatory for a vehicle to carry the manufacturer prescribed tool kit and a specified first aid kit; driving without these accessories would contravene the Rule. Because the kits are supplied as accessories to meet statutory requirements and are used in relation to the manufacture/clearance of the vehicle, they fall within the definition of 'input' and attract Cenvat credit under Rule 3 read with Rule 2(k)(i). The Tribunal's earlier decisions on substantially similar facts support this conclusion. Consequently, the Commissioner's disallowance of Cenvat credit in respect of the tool/first aid kits was legally unsustainable. [Paras 10, 11, 12, 13, 14]The appellant was rightly entitled to Cenvat credit on tool and first aid kits; the order disallowing credit and confirming demand, interest and penalty is set aside and the appeal is allowed.Final Conclusion: The appeal is allowed: tool kits and first aid kits supplied with two wheelers qualify as inputs under Rule 2(k)(i) of the Cenvat Credit Rules, 2004, and the order disallowing Cenvat credit and imposing demand, interest and penalty is set aside. Issues:1. Whether tool/first aid kits sold along with two wheelers qualify as inputs eligible for Cenvat credit.2. Validity of the order disallowing Cenvat credit and imposing penalty.Analysis:1. The appellants, engaged in manufacturing two wheelers, availed Cenvat credit on tool/first aid kits sold with two wheelers. The Department alleged wrongful credit availing, leading to show cause notices and subsequent disallowance of credit by the Commissioner. The appellant contested, citing the definition of 'input' under Rule 2(k)(i) of Cenvat Credit Rules, 2002, and Rule 138 of Central Motor Vehicle Rules, 1989. The appellant argued that the kits were necessary accessories per statutory requirements, entitling them to claim Cenvat credit under Rule 3(i) of Cenvat Credit Rules, 2002.2. The appellant challenged the order-in-original, seeking waiver of pre-deposit for duty demand, interest, and penalty. During the hearing, the appellant's counsel argued that the order disregarded legal provisions and relied on Tribunal decisions supporting their claim. On the other hand, the Revenue contended that the kits were not accessories as per the rules, being 'bought out items' not directly related to the manufacture of two wheelers. The Tribunal analyzed the definition of 'input' under Rule 2(k)(i) of Cenvat Credit Rules, 2004, and the mandatory requirement of tool/first aid kits under Rule 138 of Central Motor Vehicle Rules, 1989.3. The Tribunal found that the tool/first aid kits were sold along with two wheelers, their cost included in the final product. Considering the statutory obligation for drivers to carry these kits as per Rule 138, the Tribunal concluded that the kits were necessary accessories for the vehicles. Therefore, the kits fell within the definition of 'input' under Rule 2(k)(i) of Cenvat Credit Rules, 2004. Relying on previous Tribunal decisions, the Tribunal allowed the appeal, setting aside the order disallowing Cenvat credit, duty demand, interest, and penalty.4. In conclusion, the Tribunal held that the impugned order disallowing Cenvat credit was legally unsustainable. The appeal was allowed, and the order confirming the demand, interest, and penalty was set aside. The Tribunal disposed of the appeal accordingly.