Cenvat credit cannot be denied on Inputs forming ‘parts’ of final product

Cenvat credit cannot be denied on Inputs forming ‘parts’ of the final product, and more so when value thereof is included in the value of final products

Hero Honda Motors Ltd. (Assessee) is engaged in the business of manufacture of Motor Cycles. The Assessee availed Cenvat credit of mirror assembly, sari guard and tool kit (impugned goods) treating them as Inputs. However, the Department denied Cenvat credit so availed on the ground that the said items were not used in or in relation to manufacture of Motor Cycle and therefore, not eligible to be called ‘Inputs’ for the period prior to March 1, 2011[when the definition of Inputs under Rule 2(k) of the Cenvat Credit Rules, 2004 (Credit Rules) was amended vide Notification No. 3/2011-CE(NT) dated march 1, 2011]and accordingly, ineligible for Cenvat credit under the Cenvat Credit Rules, 2004 (Credit Rules).

Later on, the Adjudicating Authority allowed Cenvat credit in respect of the impugned goods to the Assessee. Being aggrieved, the Department filed the appeal before the Hon’ble CESTAT, Delhi.

The Hon’ble CESTAT, Delhi relying upon the following judgments:

• Hero Moto Corp Ltd. Vs. CCE [(2014) 43 GST 339/ [(2013) 30 taxmann.com 19 (New Delhi CESTAT)]
• CCE Vs. Honda Motorcycle & Scooter India (P.) Ltd. [2014] 46 GST 355/46 taxmann.com 408 (Punj&Har.)]

held as under:

• The definition of ‘Inputs’ given under Rule 2(k) of the Credit Rules is inclusive and wide as it starts with the words all goods;
• The goods excluded are light diesel oil and high speed diesel 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;
• It is not disputed that the impugned goods are cleared along with the Motor Cycle and the value thereof is included in the assessable value of the Motor cycle.

Accordingly, the Hon’ble Tribunal allowed Cenvat credit on the impugned goods to the Assessee on the ground that the same are ‘parts’ of the Motor Cycle and eligible for Cenvat credit as ‘Inputs’.

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