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of <h1>Customs classification for motor vehicles upheld over Excise Department; Rule 57AB(1)(b) applied, vendors retain credit.</h1> The Tribunal upheld that components classified as motor vehicles under Heading 87.03 by Customs couldn't be reclassified by the Excise Department. The ... Demand - Cenvat/Modvat Issues:Appeals challenging demand of Cenvat credit and penalties arising from order-in-original passed by Commissioner of Central Excise.Analysis:1. Classification of Components and Cenvat Credit Disallowance:- M/s. Maruti Udyog Ltd. imported components for vehicles, classified under Heading 87.03, and took Cenvat credit. They sent components to vendors who further processed them. The Commissioner disallowed Cenvat credit to vendors, classifying components under Heading 87.08 or 94.01 instead.- Legal precedent from CCE v. American Auto Services and Asia Brown Boveri supports reversing credit when inputs are removed as such. Maruti Udyog Ltd. followed the procedure, and retrospective application of amended Rule 57AB was deemed inapplicable.2. Payment of Duty and Vendor's Liability:- Dispute arose regarding duty payment at 40% by Maruti and classification of components. Vendors argued assessment finality at supplier's end precludes re-assessment at recipient's end. Precedents like Garg Ispat Udyog Ltd. v. CCE supported this argument.- Double duty demand on M/s. Brakes India Ltd. was contested, and penalty imposition was challenged based on adherence to duty paying documents and lack of objection from the Department.3. Revenue's Contentions and Legal Interpretation:- Revenue argued duty payment should align with Rule 57AB(1)(b) and that the duty ought to have been paid at 16%, not 40%. Precedents like N.B. Sanjana and Gursahai Saigal were cited to support this stance.- Allegations of collusion between vendors and Maruti Udyog Ltd. were raised, emphasizing the need for correct duty payment and credit availing.4. Tribunal's Decision and Legal Precedents:- Tribunal affirmed that components classified as motor vehicles under Heading 87.03 by Customs couldn't be reclassified by the Excise Department. The application of Rule 57AB(1)(b) was upheld, and vendors were deemed eligible for the credit availed.- Precedents from Maruti Udyog Ltd. case and interpretations of Rule 57F(1) supported the vendors' position, leading to the setting aside of the impugned order and allowing all appeals.
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