2024 (9) TMI 1019 - AT - Central Excise

CENVAT credit allowed on inputs for manufacturing sample vehicles exported for testing under Rules 3 and 19

M/s Maruti Suzuki India Ltd Versus Commissioner of CGST, Delhi-III

CESTAT Chandigarh allowed the appeal regarding CENVAT credit on inputs used for manufacturing sample vehicles exported for testing under Rule 19 of ... CENVAT Credit - inputs used for manufacturing sample vehicles exported for testing under rule 19 of the Central Excise Rules, 2002 without payment of duty by furnishing letter of undertaking - HELD THAT:- This issue is no more res integra and has been settled in the appellant’s own case M/S MARUTI SUZUKI INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III [2023 (10) TMI 803 - CESTAT CHANDIGARH] which relates to earlier period and subsequent period. This Tribunal in appellant’s own case M/S MARUTI SUZUKI INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III [2023 (10) TMI 803 - CESTAT CHANDIGARH] allowed the appeal filed by the appellant and held that testing of sample vehicles is integral to the activity of manufacture and thus Cenvat credit attributable to the inputs gone into manufacture of said products is admissible. As per Rule 3 of the Cenvat Credit Rules, 2004 provides that the manufacturer of a final goods shall be entitled to avail the credit of the specified duties in respect of inputs or capital goods received in factory of the manufacturer for use in or in relation to, the manufacture of the final products. The Tribunal in catena of decisions held that export of sample vehicle is integral part of the manufacturing process and hence the Cenvat credit cannot be denied on the input used to manufacture the sample vehicles. Since, the issue has already been settled in appellant’s own case and by following the ratio of the said decisions the impugned orders are not sustainable in law and the same is set aside - Appeal allowed. Issues:Denial of Cenvat credit on inputs used for manufacturing sample vehicles exported for testing.Analysis:The judgment revolves around two appeals challenging the denial of Cenvat credit on inputs used for manufacturing sample vehicles exported for testing. The Commissioner had denied the Cenvat credit of Rs. 21,03,712 and imposed a penalty under the Cenvat Credit Rules, 2004. The appellant, engaged in manufacturing motor vehicles, spares, and components, sent vehicles for testing to associated companies outside India without receiving payment. An audit officer contended that Cenvat credit was not permissible on such exported sample vehicles. A show cause notice was issued, leading to the denial of credit, interest, and penalty. The appellant argued that previous judicial decisions favored them, citing cases where Cenvat credit was allowed for sample vehicles exported for testing.The appellant's counsel argued that the impugned order did not consider relevant facts and legal precedents. They highlighted that testing sample vehicles is an integral part of the manufacturing process, as supported by judicial decisions. The appellant had complied with export regulations and received certification for exporting samples without realizing export proceeds. The counsel emphasized that Cenvat credit rules allow credit for inputs used in manufacturing final products. They contended that denying credit for sample vehicles would be unjustified as testing is essential for ensuring product quality and safety before mass production.The Tribunal, after considering the arguments and precedents, concluded that denial of Cenvat credit on inputs for manufacturing sample vehicles exported for testing was unsustainable. Citing previous decisions and the Cenvat Credit Rules, the Tribunal held that testing sample vehicles is crucial to the manufacturing process, making the credit admissible. The impugned orders were set aside, and the appeals of the appellant were allowed with consequential relief as per law.In conclusion, the judgment clarifies the admissibility of Cenvat credit on inputs used for manufacturing sample vehicles exported for testing. It emphasizes the integral role of testing in the manufacturing process and upholds the appellant's right to claim credit for such activities, as supported by legal provisions and precedents.