CESTAT, NEW DELHI BENCH
Hero Motocorp Ltd.
Commissioner of Central Excise, Delhi-III
FINAL ORDER NOS. A/667-672 of 2012-EX(BR)(PB)
STAY ORDER NOS. 910-915 of 2012-EX(BR)(PB)
APPLICATION NOS. E/STAY/1014-1017 & 974-975 of 2012
APPEAL NOS. E/828-831 & 794-795 of 2012
JUNE 7, 2012
By this order, we propose to dispose of aforesaid six appeals involving similar question of law and facts involving same parties.
2. Briefly stated the facts relevant for the disposal of these appeals are that the appellant M/s. Hero Motocorp Ltd. is engaged in the manufacture of two wheelers falling under chapter 87 of the Central Excise Tariff Act, 1985 and was availing Cenvat credit facilities in respect of tool kits sold alongwith two wheelers. The appellant for the purpose of excise duty included the value of tool kits in the invoices issued for sale of motor cycles. The department was of the view that the tool kits were purchased by the appellant from the market and availed and utilized the Cenvat credit in respect of excise duty paid for the tool kits.
3. The department was of the view that the Cenvat credit availed by the appellant in respect of tool kits was not permissible under Rule 3(i) of Cenvat Credit Rules, 2002. Accordingly, show cause notices were issued to the appellant raising the demand in respect of above referred appeals relating to different periods. The Commissioner by disallowing the Cenvat credit availed by the appellant and penalty of equal amount was also imposed.
3.1Shri S. Ganesh, learned Senior Advocate appearing for the appellant assailed the impugned order on the ground that the order has been passed ignoring the basic provisions of law. Expanding the arguments, learned Senior Counsel submits that the tool kits were sold alongwith two wheelers defined as inputs under Rule 2(k) of Cenvat Credit Rules, 2002. Learned Counsel submits that as per definition of the inputs means the goods used in or in relation to the manufacture of final product and includes the accessories of the final products cleared alongwith final product. Learned Counsel has referred to Rule 138 of Central Motor Vehicle Rules, 1999 as amended makes it mandatory for the manufacturer to clear every vehicle alongwith a set of tool kit. Therefore, the tool kit is essential component/accessories sold along with two wheelers to meet the requirement of Rule 138 of Central Motor Vehicle Rules, 1999. Thus, these inputs entitle the appellants to claim Cenvat credit in respect of excise duty paid on purchase of tool kits and first aid kits in view of Rule 3(i) of Cenvat Credit Rules, 2002.
4. Thus, learned counsel for the appellant has thus concluded that the appellant has correctly availed the Cenvat credit on tool kits and strongly urged for setting aside of the impugned order.
5. In support of his contention, he has relied upon the various decisions of the Tribunal namely – (i) CCE v. Bajaj Tempo Ltd. 2006 (205) ELT 404 (Tri. – Delhi) (ii) Bajaj Tempo Ltd. v. CCE 2008 (230) ELT 506 (Tri. – Mum.) and (iii) Kinetic Motor Company Ltd. v. CCE 2001 (129) ELT 366 (Tri. – Delhi).
6.ShriNageshPathak, learned AR for Revenue on the contrary has argued in support of the impugned order. He submitted that tool kits are not accessories as envisaged under Rule 57A of Central Excise Rules, 1944 or Rule 2(k)(i) of Cenvat Credit Rules, 2002.
7. Learned AR for the Revenue has emphasised that the aforesaid tool kits are “bought out items” which are neither fitted with motorcycle/two wheelers nor are used in or in relation to the manufacture of motorcycles by the appellant. Thus it is contended that the adjudicating authority has rightly disallowed the Cenvat credit availed in respect of tool kit as inputs and confirmed the duty demand against the appellant.
8. In support of his contention, learned DR has relied upon the judgment of the Patna High Court in the matter of Tata Engineering & Locomotive Co. Ltd. v. Union of India 1994 (72) ELT 525 and also the judgment of the co-ordinated Bench of the Tribunal CESTAT in the matter of CCE v. MarutiUdyog Ltd. 2000 (120) ELT 580 (Tri. – Delhi).
9. We have considered the rival contentions and perused the record. The issue for determination in this appeal is whether or not the tool kit indisputably sold by the appellant along with motorcycle fall within the purview of the definition of ‘input’ eligible for Cenvat credit under Rule 2(k)(i) of Cenvat Credit Rules, 2004.
10. In order to find answer to the aforesaid question, it is necessary to have a look at relevant Cenvat Credit Rules, 2004. Rule 3 of Cenvat Credit Rules, provides that a manufacturer or producer of final product shall be allowed to take Cenvat credit on the excise duty or additional excise duty paid on any input or capital goods received in the factory for manufacture of final products.
11. ‘Input’ has been defined in Rule 2(k)(i) which reads thus –
“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 along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production”.
On bare reading of the aforesaid provision, it is clear that ‘input’ means and includes accessories of final product cleared along with final product.
12. Now, the question arises whether tool kit can be termed as accessories of final product as envisaged in the definition of ‘input’ in Rule 2(k)(i) of Cenvat Credit Rules, 2004?
13. Undisputedly, the tool kits are sold by the appellant along with final product and their cost is included in the same.
14. Rule 138 of Central Motor Vehicle Rules, 1989 (as amended) deals with “signals and additional safety measures” for motor vehicle. Clause 4(b) of Rule 138 makes it incumbent on driver of every vehicle to carry the tool kit prescribed by the manufacturer. Since carrying of the tool kit in the vehicle is obligatory for the driver, it can be safely inferred that tool kit and first aid kit are necessary accessories of the motor vehicle because driving of the vehicle without those accessories would be violative of Rule 138(4)(b) of Central Motor Vehicle Rules, 1989. Thus, we are of the view that the appellant had supplied the tool kit as per statutory requirements under Central Motor Vehicle Rules, 1989 as accessories to be used in relation to the manufacture of vehicle. Thus, ‘tool kit’ in our view is squarely covered by the definition of ‘input’ given under Rule 2(k)(i) of Cenvat Credit Rules and that the appellant had rightly availed the Cenvat credit in relation to tool kits. In our aforesaid view, we find support from the earlier orders of the Tribunal in the matter of Bajaj Tempo Ltd. v. CCE 2007 (207) ELT 600 (Tri. – Delhi) as also Bajaj Auto Ltd. v. Collector of Central Excise 1996 (88) ELT 355 (Tri. – New Delhi)(LB).
15. As regards the judgments relied upon by the respondent, we may note that the judgment of Patna High Court in TELCO is not applicable to the facts of this case for the reason that the aforesaid judgment was passed in relation to interpretation and scope of the Rule 57A of Central Excise Rules, 1944 which did not include accessories of the final product in the definition of input. This case is governed by Cenvat Credit Rules, 2004 wherein accessories have also been included in the definition of input. Similarly, the judgment of the Tribunal in the matter of MarutiUdyog Ltd. (supra) is not applicable as it relates to provisions prior to coming into operation of Cenvat Credit Rules, 2004.
16. In view of the above discussion, the impugned order of the Commissioner disallowing the credit in respect of tool kits sold alongwith the vehicle to enable the customer to comply with statutory provisions of Rule 138 of Motor Vehicles Rules is not sustainable in law. The impugned order is set aside. The stay application as well as the appeals are disposed of.