IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.E.A.No.52 of 2012 (O&M) Date of Decision:09.05.2013 Commissioner of Central Excise ...Appellant versus M/s Honda Motorcycle & Scooter India PVT.Ltd...Respondent CORAM: HON'BLE Mr.JUSTICE HEMANT GUPTA HON'BLE Ms.JUSTICE RITU BAHRI Present: Mr.Sunish Bindlish, Advocate, for the appellant.
HEMANT GUPTA, J.(Oral) The present appeal under Section 35G of the Central Excise Act, 1944 arises out of an order passed by the Customs Excise and Service Tax Appellate Tribunal (for short “the Tribunal”.) on 24.4.2012.
The revenue has claimed the following substantial questions of law:- (i) Whether the Hon'ble CESTAT is correct in ignoring the decisions taken by the higher courts setting the precedent to follow which has been made the basis to confirm the demand by the Commissioner (Adj).New Delhi?.
(ii) Whether the Hon'ble Tribunal has correctly interpreted inputs used in relation to manufacture of the final products as appearing in Rule 2(k) of the Cenvat Credit Rules, 2004?.
(iii) Whether the phrase `inputs used in relation to' the manufacture of final products does not postulates that the input must directly or indirectly participate in the process of manufacture of the goods?.
Kumar Vimal 2013.05.22 11:13 (iv) Whether the Hon'ble CESTAT is correct in ignoring I attest to the accuracy and integrity of this document Chandigarh C.E.A.No.52 of 2012 (O&M) -2- earlier rulings of the Tribunal wherein Tool Kits have not been held to be 'inputs' within the meaning of Cenvat Credit Rules, 2004?.
(v) Whether the Hon'ble CESTAT is correct in placing reliance on the ruling in the case of Bajaj Auto LTD.(ibid) when the same has been held not good by the CESTAT, Delhi in the case of Daewoo Motors LTD.(supra)?.
The said questions of law are said to have arisen in view of the fact that the Adjudicating Authority has disallowed Cenvat Credit availed by the manufacturer and ordered recovery of inadmissible Cenvat Credit amounting to Rs.50,65,946/- under Rule 14 of the Cenvat Credit Rules, 2004 read with fiRs.proviso to Section 11A(1) of the Central Excise Act, 1944.
The Adjudicating Authority also ordered recovery of interest and imposed penalty.
The assessee- respondent is engaged in manufacture of two wheelers falling under Chapter 87 of the Central Excise Tariff Act, 1985 and has availed Cenvat credit facilities in respect of tool kits and fiRs.aid kits sold along with two wheeleRs.During audit, it was found that the respondent has availed Cenvat credit amounting to Rs.72,34,801/- for the period 2007-08.
The respondent was asked to provide details of the Cenvat Credit availed.
It was found that during the period 2004-05 to 2008-09, the respondent has availed Cenvat credit on tool kits and fiRs.aid kits sold along with two wheelers to the tune of Rs.3,70,28,767/-.
The revenue was of the view that Cenvat credit was not permissible under Rule 3(i) of Cenvat Credit Rules, 2002 on such product.
After show cause notice, the Adjudicating Authority disallowed Cenvat credit as mentioned above.
Kumar Vimal 2013.05.22 11:13 I attest to the accuracy and integrity of this document Chandigarh C.E.A.No.52 of 2012 (O&M) -3- The learned Tribunal has relied upon a Larger Bench order of the Tribunal reported as 1996 (88) ELT 35.(Tribunal) Bajaj Auto Limited v.
Collector of Central Excise, Pune followed later by the Tribunal in a judgment reported as 2007 (207) ELT 60.Bajaj Tempo Limited versus Commissioner of Central Excise, Indore to hold that the respondent has supplied tool kits and fiRs.aid kits to the buyers as per statutory requirements under Central Motor Vehicle Rules, 1989 as accessories to be used in relation to the manufacture of vehicle.
Thus, both tool kit and fiRs.aid kit are covered by the definition of input given under Section 2(k)(i) of the Cenvat Credit Rules.
Learned counsel for the appellant has vehemently argued that as per the definition of input, the goods which are used in or in relation to manufacture of final product alone are entitled to benefit of Cenvat input credit.
Since neither the tool kits not the fiRs.aid kits are used in or in relation to manufacture of final products, mere fact that they have to be sold along with vehicle will not entitle the respondent to avail the benefit of Cenvat input credit.
We do not find any merit in the argument raised by learned counsel for the appellant.
The relevant extract from Rule 2(k) of Cenvat Credit Rules reads as under:- “(k) input means- (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of Kumar Vimal 2013.05.22 11:13 I attest to the accuracy and integrity of this document Chandigarh C.E.A.No.52 of 2012 (O&M) -4- electricity or steam used in or in relation to manufacture of final products or for any other purpose within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit commonly known as petrol and motor vehicles, used for providing any output service; Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacture.”
A reading of the said definition shows that it is inclusive and wide as it is started with the words “all goods”.The goods excluded are light diesel oil, high speed oil and motor spirit which are in the nature of consumables.
The final product cannot be given restricted meaning so as to mean as the engine of the vehicle or the chassis but all things which are necessary to make the final product marketable.
What is excluded is the fuel which is to be consumed for running of the vehicle.
All goods which are part of the original equipment are entitled to Cenvat credit as per definition of 2(k)(i) reproduced above.
Learned counsel for the appellant has referred to a judgment of Patna High Court reported as 1994(72) ELT 52.Tata Engineering & Locomotive Co.LTD.wherein the tool kits supplied by the assessee with motor vehicle were not treated as input while considering the old Modvat credit scheme.
It is contended that Special Leave Petition against the said order has been dismissed by Hon'ble the Supreme Court.
Therefore the judgment of the Patna High Court as affirmed by Hon'ble the Surpeme Court is binding on the Tribunal.
We do not find any merit in the said argument as well.
The Kumar Vimal 2013.05.22 11:13 I attest to the accuracy and integrity of this document Chandigarh C.E.A.No.52 of 2012 (O&M) -5- aforesaid judgment of the Patna High Court has been taken into consideration by the Larger Bench in the judgment reported as Bajaj Auto Limited (supra) and also order of the Supreme Court.
The Tribunal has found that the Tata Engineering & Locomotive Co.LTD.(supra) decided by the Patna High Court considered the matter of manufacture, sale and clearance of motor vehicle chassis and not motor vehicles.
For motor vehicle, the tool kit and the fiRs.aid kit has to be part of the vehicle before the same can be put to use.
In view of the above discussion and the larger Bench Order of the tribunal, we do not find any substantial question of law arises for consideration.
In view of the above, we do not find any merit in the present case and the same is dismissed.
( HEMANT GUPTA ) JUDGE May 09, 2013 ( RITU BAHRI ) renu/Vimal JUDGE Kumar Vimal 2013.05.22 11:13 I attest to the accuracy and integrity of this document Chandigarh