Relief To Maruti Suzuki: CESTAT Clarifies CENVAT Credit on Accessories Can Be Availed If Included In Assessable Value of Final Products [Read Order]

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that CENVAT credit is admissible on accessories such as bolts, screws, and washers if their value is included in the assessable value of the final product.

Maruti Suzuki India Limited, the respondent, manufactures motor vehicles and parts. The case arose from two show-cause notices ( SCNs ) issued by the department. The first SCN covered the period from August 2006 to March 2011 denying credit of Rs. 11.18 crore and the second SCN addressed the period from April 2011 to March 2012 denying credit of Rs. 6.49 crore.

The department alleged that items such as bolts, screws, nuts, washers, and other accessories did not qualify as "inputs" under Rule 2 (k) of the CENVAT Credit Rules because no manufacturing activity was performed on them within the factory premises.

Master GST - Expert-Led Courses for Ambitious Professionals Click here

On appeal, the Commissioner of Central Excise dropped the demands, holding that the items in question were used in or in relation to the manufacture of the final products and were therefore eligible for CENVAT credit.

Aggrieved by this decision, the department appealed claiming that the order lacked specific findings on the eligibility of the items for credit and that the Commissioner had failed to discuss each item individually.

In response, the company argued that the items were either spare parts or accessories supplied along with the vehicles. These items were necessary for the safe transportation of vehicles or added to their marketability.

The respondent further argued that the items were received on the factory premises, and their value was included in the assessable value of the final product. The department counsel countered that the Commissioner’s order was non-speaking and lacked analysis of the disputed items. It also argued that some items were cleared free of cost or did not enter the assembly line which disqualifies them as inputs under the CENVAT Credit Rules.

Master GST - Expert-Led Courses for Ambitious Professionals Click here

The two-member bench, comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the definition of "input" under Rule 2(k) before and after 1 March 2011 included accessories cleared along with the final product if their value was part of the assessable value.

The tribunal clarified that the Commissioner had correctly determined that the items were either parts or accessories and their value was included in the assessable value of the vehicles.

The tribunal explained that the admissibility of CENVAT credit for such items was already settled in law and the department could not retrospectively challenge the findings. The appeal by the revenue was dismissed and upheld the respondent's entitlement to CENVAT credit on the disputed items

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates