TaxTMI 
TaxTMI 
2000 (9) TMI 499
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....g system component kits (hereinafter referred to as AC kits) used in the manufacture of air-conditioned models of the cars. The Commissioner of Central Excise vide his impugned order has disallowed the Modvat credit of Rs. 2,36,24,932/- by holding that AC kits were not parts/components/accessories of motor vehicles and as such the benefit of Modvat credit of duty paid on them under the provision of Rule 57A cannot be allowed to the appellants. In addition, a personal penalty of Rs. 1 crore has also been imposed upon the appellants. 2. Shri S.K. Bagaria, ld. Advocate appears for the appellant and submitted that the appellant is manufacturer of cars of different models. Some models are air-conditioned and some are non-air-conditioned.....
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....ese circumstances there was no justification for the adjudicating authority to disallow Modvat credit availed by the appellant on these AC kits. He placed reliance on the decision of the Tribunal in the case of CCE v. Maruti Udyog Ltd. - 1999 (107) E.L.T. 118 wherein the Tribunal held that the Modvat credit in respect of clock assembly, radio, audio system, etc., used in the manufacture of Deluxe model of motor cars was available. He submits that all other appellants are being allowed Modvat credit in respect of AC kits and wherever proceedings have been initiated against the assessees, the same have been droped. 4. Shri Bagaria further submits that the entire case arose against them as a result of audit objection. Subsequently a cl....
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....idered as accessories, the benefit of Modvat credit can still not be denied to them inasmuch as the explanation to Rule 57A(1) was amended on 29-6-1995 with the introduction of clause (e) extending the definition of inputs to the accessories of the final product cleared along with such final product, the value of which is included in the assessable value of the final product. As such he submits that even if air-conditioners are considered to be accessories, the same would the covered by the definition of inputs inasmuch as the value of AC kits has admittedly been included in the value of the final product and the period involved is July, 1995 to April, 1998 i.e. after the amendment was carried out in Rule 57A. As such submits the ld. Advoca....
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....d. SDR appears for the Revenue and reiterates the reasoning of the authorities below. 8. We have considered the submissions of both the sides. We find that in the types of cars which are called air-conditioned cars, air-conditioner kit is not simply fitted on manufactured car. Various parts of the air-conditioner are fitted during the course of manufacturing of an air-conditioned car. The manufacturing processes and steps are entirely different In case of an AC car and a non-AC car. Different components of AC kits have to be put appropriately at different places in the engine so that the air-conditioning is effective and heat absorbed is turned out effectively. In these set of facts and circumstances and the manufacturing process it....