DAEWOO MOTORS INDIA LTD Vs. CCE

JUDGEMENT

(1.) APPELLANT is engaged in the manufacture of Motor Vehicles falling under Chapter Heading 8702 to 8706 of the Central Excise Tariff Act, 1985. The issue raised in these appeals is whether the value of tool kits has to be included in the assessable value of passenger cars manufactured by them under Section 4 of the Central Excise Act.

(2.) EXCISE Department issued show cause notices to the appellant company calling upon them to show cause why value of tool kits cleared with passenger cars should not be added to the assessable value of the cars and duty assessed accordingly. Appellants raised many contentions against the inclusion of the value of tool kits to the assessable value of the passenger cars manufactured by them. It was contended that tool kits is not a statutory requirement for the purpose of registration of a passenger car or for running the same, tool kits does not enhance the marketability of the car; nor does it go to ensure completion of the manufacturing process of the car and that the Central Excise tariff entry does not talk of vehicles with tool kits. These contentions raised by the appellant were rejected by the adjudicating officer as evidenced by Order -in -Original No. 32 -34/AC/NOIDA/99 dated 25.5.99. As per that order Central Excise duty amounting to Rs. 20,07,454 was confirmed under Section 11A of the Act. Interest at the rate of 18% per annum also levied for the period from the expiry of three months from the date of order till the date of payment under Section 11AA of the Act. This order was challenged in appeal before the lower appellate authority. Appellate authority while disposing of the appeal as per Order -in -Appeal No. 930 -931 -CE/MRT/99 dated 24.11.99 observed that the appellant should be given the facility of Modvat credit on tool kits subject to their establishing the claim (with satisfactory evidence) of duty payment on the 'tool kits'. Appellate authority also directed the Assistant Commissioner to give credit to the sales tax amounts as provided by Section 4(4)(d)(ii) of the Act. In appeal before this Tribunal the short question that was urged was whether the value of tool kits should be added to the price of the car for purposes of imposing duty under the Central Excise Act.

(3.) WAY back in 1994, a Division Bench of Patna High Court went into the question as to whether tool kits supplied by manufacturers of motor vehicle chassis is 'input' used in relation to the manufacture of final product entitled to Modvat credit under Rule 57A of the Central Excise Rules, in Tata Engineering and Locomotive Co. Ltd. v. Union of India . The High Court took the view that tool kits supplied with motor vehicle chassis do not participate directly or indirectly in or in relation to the manufacture of motor vehicle chassis. Relying on the decision of the Supreme Court in the case of Union of India v. Bombay Tyre International Ltd. 1983(14) ELT 1896, Their Lordships found that manufacturers of chassis were adding cost of tool kits in the assessable value of chassis because they have contributed to the value of the chassis and not for the reason that such tool kits are used in or in relation to the manufacture of chassis. Since the chassis are marketable without the help and assistance of tool kits, the tool kits supplied at the request of the customers cannot be said to be 'inputs'. Their Lordships thereby came to the conclusion that tool kits which are bought out items supplied along with motor vehicle chassis cannot be treated as 'inputs' for the purpose of availing the benefit of Modvat credit under Rule 57A of the Central Excise Rules.