Cenvat credit on statutorily required saree guards allowed as they formed part of the marketable motorcycle and scooter

Cenvat credit was held admissible on saree guards cleared along with motorcycles and scooters because the guards were statutorily required safety devices under the Central Motor Vehicle Rules and formed part of the complete marketable vehicle. Since the vehicle could not be sold as a finished product without the protective device and its cost was included in the assessable value, the item was treated as an input for credit purposes. The disallowance was therefore set aside.

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Issues: Whether cenvat credit was admissible on saree guards cleared along with motorcycles and scooters.

Analysis: The saree guard was held to be a statutorily required safety device under Rule 123 of the Central Motor Vehicle Rules, 1989. Since the vehicle could not be sold as a complete finished product without the protective device, and its cost was included in the assessable value of the vehicle, the item was treated as necessary for marketability. The reasoning followed the view that the definition of input is wide enough to cover goods forming part of the marketable final product, and the same principle was applied to the saree guard.

Conclusion: Cenvat credit on saree guard was admissible and the disallowance was set aside.

Ratio Decidendi: An item that is statutorily required, cleared along with the final product, and necessary to render the final product marketable can qualify as an input for cenvat credit purposes.

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