Cenvat Credit on Input or Capital Goods cannot be Denied merely for Showing Tubes and Flaps Separately in Invoices: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that Cenvat Credit on Input or Capital Goods cannot be denied merely for showing tubes and flaps separately in invoices.

The appellants, M/s Goodyear India Limited, are engaged in the manufacture of tyres. The appellants purchased tubes and flaps from other manufacturers and cleared the same along with the tyres to the original equipment manufacturers and overseas purchasers and have availed CENVAT credit on the said tubes and flaps which is disputed by the Department by issuing a show-cause notice dated 04.04.2011 covering the period from March 2006 to January 2011; .

The said show-cause notice was adjudicated vide impugned order wherein the demand of CENVAT Credit of Rs.2,97,33,358/- was confirmed along with equal penalty.

The appellant submitted that the denial of CENVATA credit on tubes and flaps is not correct as the same is covered under the definition of “Input” under Rule 2(k)(i) of CCR, 2004; in the industry, tyres, tubes and flaps is known as set packing for readymade fitment in vehicles; thus, the tubes and flaps are covered under the ambit of “all goods used in or about the manufacture of final products”; in addition, they can also be treated as “accessories” and either way, credit is admissible.

On the other hand, the department argued that the appellants have not declared their intent to use the tubes and flaps as inputs in the respective declarations, moreover, the appellants supplied wrong data of CENVAT credit taken on flaps and tubes, which was found incorrect during the audit and this amounts to suppression of fact and therefore, extended period is invocable.

The issue involved in the case is whether the appellants are eligible for CENVAT credit, on the flaps and tubes supplied along with tyres cleared by them in a set packing. The Department contends that the said tubes and flaps are not used in the manufacture of the tyres and as such do not qualify to be “inputs” given the definition given under Rule 2(k) of CCR, 2004.

The appellants further submitted that the Department itself has decided the issue of applicability of CENVAT credit on tubes and flaps, for the period 2006-2007, in favour of the appellant themselves.

A two-member bench of Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) held that “the appellants are eligible to avail CENVAT credit on flaps and tubes cleared in a set packing along with the tyres manufactured by them. We further find that the Department’s objection that the assessable value of tubes and flaps is separately shown in the invoices and therefore, CENVAT credit is not available, is not acceptable in view of the various decisions.”

The CESTAT set aside the impugned order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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