Customs, Excise and Gold Tribunal - Delhi
Commissioner Of Central Excise vs Maruti Udyog Ltd. on 27 October, 1998
Equivalent citations: 1999(107)ELT118(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this appeal filed by the Revenue is whether Modvat Credit is available in respect of clock assembly, audio system sets, radio sets, speaker sets etc. used in the manufacture of delux models by M/s. Maruti Udyog Ltd.
2. Arguing on behalf of the Revenue, the ld. D.R. submitted that the manufacture of the motor vehicle is complete without these items which are not essential or integral part of the motor vehicle. According to him it is to be seen whether the finished product can be operated without these fitments and what is the contribution of these items to the manufacture of finished goods. He contended that the motor vehicle is fully manufactured even without the fitments of clock assembly, audio systems, radio etc. and these products do not contribute anything in the operation of the motor vehicle. He relied upon the decision in the case of C.C.E. v. Lipi Data Systems, Udaipur 1995 (80) E.L.T. 542 (Tribunal) in which it was held that inputs to qualify for Modvat credit under Rule 57A of the Central Excise Rules would be those which are used in or in relation to the manufacture of final product. Items which are provided normally with the final products ready for delivery at the factory gate would not qualify for such benefit if they do not satisfy the test of use in or in relation to manufacture. He further mentioned that the decision of the Supreme Court in the case Associated Paper Company relied by the Commissioner in the impugned order is not applicable to the facts as that decision was not pronounced in respect of Modvat credit. He finally submitted that the products on which Modvat credit has been allowed by the Commissioner do not qualify with (sic) the essential accessories as these are in the nature of fitments which are not necessary in the operation of the motor vehicle. He also submitted that Commissioner was moved by the fact that the value of the product was included in the assessable value of the motor vehicle. In this connection, he again referred to the decision in Lipin Data Systems in which it was held by the Tribunal that the inclusion of the cost of the accessories in the value of the articles in question may not be conclusive for deciding the admissibility for Modvat of such accessories and the real test is whether the said accessories are used in or in relation to the manufacture of the final product.
3. Countering the arguments, Shri Shiva Dass, ld. Counsel submitted that larger part of the demand raised in the show cause notice has been held to be time barred by Commissioner in the impugned order and the Revenue has not preferred any appeal on this aspect. Only a very small portion of the demand is within the time limit. He submitted that the Commissioner has specifically held in Para 22 of the impugned order that for the Delux Model of the vehicle manufactured by the Respondents company, these items are absolute necessity to make them commercially viable and marketable. This observation of the Commissioner has not been reverted by the Revenue at all not even any submissions has been made in the appeal memorandum. He contended that as the absolute necessity of these products has not been disputed by the Revenue Modvat credit is available to the Respondents in respect of these products. Finally he mentioned once items are considered essential in the marketing for particular model Modvat credit is admissible and he relied upon the following decisions:
(i) Collector v. Jay Engineering Works Ltd. - 1989 (39) E.L.T. 169 (S.C.)
(ii) Hindustan Lever Ltd, v. Collector - 1994 (70) E.L.T. 595 (Tribunal)
(iii) STI Biplus Tubing (I) Ltd. v. Collector - 1996 (81) E.L.T. 346 (Tribunal)
(iv) Collector of Central Excise v. Swaraj Mazda - 1993 (68) E.L.T. 258 (Tribunal)
4. We have considered the submissions made by both sides. We observe that the products such as clock assembly, radio, audio systems etc. are used by the respondents in the manufacture of their Delux Model of motor car. It has not been disputed by the Revenue that these products were not used in the Motor car manufactured and cleared by the respondents. It has also not been disputed that the value of these items was not included in the assessable value of the Motor vehicle. The Commissioner has given his findings in the impugned order that the use of these products was absolutely essential for the manufacture of Delux Model car. The department has filed their appeal only contending that these products were not essential for manufacture or operation of motor vehicle. It has been lost sight that what is being manufactured by the respondents is not essentially motor car but Delux Model motor car and we agree with the findings of the Commissioner that these products were required for the manufacture of a Delux Model Car. The decision in Lipi Data case relied upon by the Revenue, Tribunal allowed Modvat credit in respect of the ribbon which was fitted in the computer printer and the Modvat credit was disallowed only in respect of additional quantity of ribbon cleared with the computer printer which is not so in the case of present one. In the case of C.C.E. v. Banmore Electricals P. Ltd. -1998 (97) E.L.T. 367 relied upon by the respondents, Tribunal allowed Modvat credit in respect of locks, padlocks provided with transformers for safeguarding the lubricant oil holding that once transformers are designed in such a way as to use padlocks and locks then it becomes integral part of the Transformers and can be termed as an input if it is so commercially supplied in all cases.
4. We, therefore, find in (sic) infirmity in the impugned order passed by the Collector. Following the ratio of the above decisions, we reject the appeal filed by the Revenue.