KRISHNA MARUTI Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) These are six applications for stay of recovery of Central Excise duty and penalty as under:

(2.) Shri V. Lakshmi Kumaran, learned Advocate submitted that M/s. Maruti Udyog Ltd. imported the components from abroad for their new model vehicle Wagon R and Baleno; that the components of vehicles imported were assessed to Customs duty and additional Customs duty under Heading 87.03 of the first Schedule to the Customs Tariff Act as complete vehicles applying Rule 2(a) of the interpretative Rules and Public Notice issued by Ministry of Commerce; that MUL took MODVAT credit of the Additional Customs duty paid on the components after receipt into their factory; that the imported components were thereafter sent to the various vendors who are Applicants here for manufacture, assembly of further components; that at the time of sending these imported components Maruti reversed the entire CENVAT Credit taken on the components at the rate of 40% and paid the duty accordingly; that based on these invoices the vendors took CENVAT Credit of duty paid on the components; that the Commissioner has disallowed the MODVAT credit on the ground that components sent by Maruti to vendors are classifiable under Heading 87.08 of the Tariff as components of vehicles or under Heading 94.01 and not as vehicles under Heading 87.03 and therefore, the excise duty ought to have been paid by Maruti should have been at the rate of 16% only and not 40%. The learned Advocate further submitted that as per provisions of Rule 57 -AB of the Central Excise Rules when the inputs on which CENVAT Credit has been taken are removed from the factory appropriate duty has to be paid on the same; that an identical controversy has arisen in the context of the erstwhile MODVAT provisions relating to Rule 57F(1)(ii) and the Larger Bench of the Tribunal in the case of Commissioner of Central Excise v. American Auto Service, 1966 (81) ELT 71 has held that when the inputs are removed as such the credit originally taken on the inputs is required to be reversed in its entirety. He, further, mentioned that five Member Bench of the Appellate Tribunal in Asia Brown Boveri v. Commissioner of Central Excise, 2000 (39) RLT 575 has affirmed the decision in American Auto Service and has held that where the inputs are removed as such, outside the factory, the credit taken on the inputs is to be reversed; that this judgment of the Larger Bench has been followed by the Tribunal in the context of second explanation to Rule 57 -AB itself in Maruti Udyog Ltd. v. Commissioner of Central Excise Final Order No. 443/2002 A dated 9.9.2002; that this decision specifically covers the present matters. Finally, he submitted that in any case that payment of duty at the rate of 40% by Maruti on the components under Heading 87.03 cannot be questioned at the vendors' end as the assessment has attained finality at Maruti's end. He relied upon the decision in the case of Hero Cycles Ltd. v. Commissioner of Central Excise, Chandigarh, 2003 (54) RLT 764.

(3.) Opposing the prayer Ms. Charul Baranwal, learned Senior Departmental Representative reiterated the findings as contained in the impugned Order and emphasized that as per provisions of Rule 57 -AB (1)(b) of the Central Excise Rules, 1944 when inputs are removed from the factory the manufacture of the final products has to pay the appropriate duty of excise leviable thereunder as if such goods or capital goods have been manufactured in the said factory and the removal shall be made under the cover of invoice prescribed under Rule 52 A; that the provisions of Rule 57 -F were different and as such the decision of the Larger Bench relied upon by the learned Advocate would not be applicable.