Mandatory rear view mirrors qualify as manufacturing inputs, allowing duty credit for vehicle manufacturers.

Rear view mirrors fitted to motor vehicles, scooters and three-wheelers were treated as inputs used in or in relation to manufacture because they were compulsory equipment under motor vehicle rules, cleared with the vehicles, and necessary for safe operation and marketability. The mirrors were not optional accessories chosen by buyers, and their functional role was distinguished from tool kits meant only for repair or maintenance. On that basis, duty paid on the mirrors was available as credit to the manufacturer.

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Issues: Whether rear view mirrors fitted to motor vehicles, scooters and three-wheelers cleared by the manufacturer were inputs used in or in relation to the manufacture of the vehicles so as to qualify for duty credit.

Analysis: Rear view mirrors were not optional accessories and were cleared along with the vehicles without any choice to the buyer. The applicable motor vehicle rules required such mirrors to be fitted, and the statutory scheme concerning construction and equipment of motor vehicles supported their compulsory use. The mirrors were also treated as necessary for safe operation and for rendering the vehicles marketable. The distinction drawn with tool kits was accepted because mirrors serve an operational and safety function, unlike items meant only for repair or maintenance. On that basis, the duty paid on the mirrors was available as credit.

Conclusion: The mirrors were inputs and the assessee was entitled to credit of the duty paid on them.

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