TELCO LTD Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE applicants are manufacturing motor vehicles and they are availing of the Modvat credit on inputs, used in the manufacture of the final product. In this case, since it is found that the issue is covered by the decision of the Tribunal, stay is granted and the appeal is taken up for disposal.

(2.) HEARD Shri J. Krishnaswamy, Asstt. General Manager of the applicant and the ld. DR, Shri B.K. Suman. In this case, the Jurisdictional Asstt. Commissioner of Central Excise issued a Show cause notice for denial of Modvat credit, alleged to be wrongly availed of, by the applicants for luggage carriers fitted/sent along with TATA SUMO, cleared by the applicant from Jan., 1995 to May, 1995. It was alleged that the luggage carrier is not used in or in relation to the manufacture of the motor vehicle and hence Modvat credit availed of thereon, has to be reversed. After considering their reply to the Show cause notice, the Dy. Commissioner of Central Excise, Pune found that the vehicle, when cleared from the applicants factory, are always fitted with luggage carriers. He also found that luggage carrier was essential for use in passengers vehicle like TATA SUMO and is also a functional part of the vehicle. The DC therefore, dropped the demand. This order was sought to be reviewed by filing an appeal before the Commissioner (Appeals) to examine the legality and propriety of the DCs order. The Commissioner (Appeals) held that the luggage carrier is neither an essential part of the vehicle, nor can it be said to have been used in the manufacture of motor vehicle. He held that it is a mere accessory and if this is to be allowed, then tool kit, which is supplied along with moped, will also be eligible for Modvat credit because storage space is provided by the said kit for the tools. On considering the submissions, it is found that on this very tool kit, referred to by the Commissioner (Appeals) in this order, the Patna High Court has held in the case of TELCO v. U.O.I. - 1994 (72) E.L.T. 325 that tool kit supplied with motor vehicle by the manufacturer, are not eligible for Modvat credit as cited by ld. DR. However, the same issue had been gone into by a Larger Bench of the Tribunal in the case of Bajaj Auto Ltd. v. Collector of Central Excise, Pune - 1996 (88) E.L.T. 355 on which appellants rely upon, wherein after considering the Patna High Court judgment above, the Larger Bench held that tool kit even assuming that they are tools, but even then considering the comprehensiveness of the words 'used in relation to the manufacture' of occurring in Rule 57A of Central Excise Rules, and further considering that the finished products are motor vehicles with these articles placed in them as necessitated by Trade Pattern, marketability test, the Larger Bench held that tool kit along with motor vehicle are input, as contemplated in Rule 57 A of Central Excise Rules and are not covered by the exclusion clause of the Explanation to that Rule. The ratio of the decision fully applies in the case of Luggage carrier fitted with and cleared by the applicant, along with their vehicle TATA SUMO. In this view of the matter, the Commissioner (Appeals) order is set aside and the appeal is allowed.