Modvat credit on luggage carriers fitted with motor vehicles allowed where they formed part of the marketable finished product.

Modvat credit was held admissible on luggage carriers fitted with and cleared along with motor vehicles because they were treated as inputs used in relation to manufacture under Rule 57A. The Tribunal applied the broader Larger Bench view that articles supplied with the finished vehicle, where required by trade pattern and marketability, can fall within the eligible input scope rather than being treated merely as accessories. The earlier restrictive view was not accepted, and the disallowance of credit did not survive.

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Issues: Whether Modvat credit was admissible on luggage carriers fitted with and cleared along with motor vehicles.

Analysis: The luggage carriers were supplied with the vehicles at the time of clearance. The Tribunal applied the breadth of the expression "used in relation to the manufacture" in Rule 57A of the Central Excise Rules and followed the Larger Bench view that articles cleared along with motor vehicles, where required by trade pattern and marketability, can fall within the scope of eligible inputs. The prior view treating such articles as mere accessories was not accepted in light of the binding Larger Bench reasoning.

Conclusion: Modvat credit on the luggage carriers was admissible and the assessee's appeal succeeded.

Final Conclusion: The appellate order disallowing credit was reversed and the demand denial did not survive.

Ratio Decidendi: Articles cleared along with motor vehicles may qualify for Modvat credit where they are covered by the broad expression "used in relation to the manufacture" and are integral to the marketable finished product as supplied.

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