Whether credit is available on hydraulic jack, ammonia paper and parts of locomotive?

PJ/Case Law/2013-14/2008

Case:-COMMISSIONER OF C.EX., BHOPAL VERSUS BHARAT HEAVY ELECTRICALS LTD.

Citation:-2013(298) E.L.T. 408 (Tri.-Del.)

Brief Facts:-This appeal is filed by Revenue against Order-in-Appeal No. 38/BPL/2011, dated 23-2-2011 passed by the Commissioner of Central Excise, Bhopal.

The brief facts of the case are that M/s. BHEL (respondent) are manufacturer of electrical goods falling under Chapters 84 and 85 of the Central Excise Tariff. They had availed credit of Rs. 7,07,041/- on the hydraulic jack, ammonia paper and parts of locomotive. According to the department, Modvat credit availed was not admissible to the respondent. A show cause notice dated 12-9-1996 was issued to the respondent for disallowance of Modvat credit under Rule 57-I of the Central Excise Rules and also proposing penalty under Rule 173Q of the Central Excise Rules. The said show cause notice was decided vide Order-in-Original dated 18-8-1998 wherein the adjudicating authority has denied the credit amounting to Rs. 6,98,805/, A penalty of Rs. 6,98,805/- was also imposed on the respondent. The respondent challenged the order before the Commissioner of Central Excise (Appeals) who vide order dated 22-3-2002 rejected the appeal for the non-compliance of the provisions of Section 35F of the Act. The respondent filed a Misc. application which was again rejected by Commissioner (Appeals) vide his order dated 21-12-2009. The respondent filed an appeal before the Tribunal and Tribunal vide order dated 7-1-2011 remanded the matter to the Commissioner (Appeals) to hear the appeal on merits. The Commissioner (Appeals) vide his impugned order dated 23-2-2011 had allowed the appeal filed by the respondent. Revenue has challenged the impugned order in the present appeal.

Appellant Contentions:-Ld. Revenue submitted that the Commissioner (Appeals) has granted the relief to the respondent relying on the Larger Bench decision of the Tribunal in the case of Bajaj Auto Limited v. CCE [1996 (88) ELT. 355 (Tri.-LB)]. He submits that this Tribunal in the case of Daewoo Motors India Ltd. v. CCE - 2001 (135) E.L.T. 596 (Tri.-Del.) has taken a different view and distinguished the decision of the Larger Bench in Bajaj Auto Ltd. He also submits that Patna High Court in Tata Engineering & Locomotive Co. Ltd. v. Union of India - 1994 (72) E.L.T. 525 (Pat.) has also held that tool kits supplied by assessee with motor vehicle chassis manufactured by them on the request of customers are not inputs used in or in relation to manufacture of final product. He therefore submits that the Commissioner (Appeals) has wrongly allowed the credit and granted relief to the respondent in respect of hydraulic jack.

Respondent Contentions:-Ld. appellant submitted that total credit of Rs. 6,98,805/- was disallowed. Out of total credit disallowed Rs. 1I,594/- only pertains to hydraulic jack and the balance amount is in respect of credit availed in respect of parts of locomotive. He submits that credit in respect of part of locomotive has not been challenged by Revenue in the present appeal. Moreover, the Commissioner (Appeals) in earlier proceedings has allowed the Cenvat credit in respect of part of the locomotives. He points out that the present appeal disputes the credit eligibility in respect of hydraulic jack only. He further submits that hydraulic jack is an essential part in respect of transformers and is to be treated as an input. He submits that in case of Tata Engineering & Locomotive Ltd. tool kits were not essential part and were being supplied on the request of the buyer. Therefore Patna High Court decision is not applicable in the present case. Therefore Revenue's appeal is without any merit.

Reasoning of Judgment:-After hearing both the sides, it was found that the issue relates to availability of Cenvat credit in respect of hydraulic jack which is an item supplied with power transformers. It is used for lifting of the transformer tank, in order to move it on rails for changing oil in the event of short circuit fault. It is necessarily supplied against each order for transformer. It was found that the Commissioner (Appeals) relied upon the Larger Bench decision in the case of Bajaj Auto Ltd. wherein the Tribunal has held that assessee is entitled to avail the Modvat credit, in respect of excise duty paid on kits. In Daewoo Motors India Ltd. this Tribunal was considering whether the value of tool kits is to be incorporated in the assessable value of the motor vehicle. It was found that decision in Bajaj Auto Ltd. is passed by Larger Bench of three Members. Accordingly, we are of the view that decision of Bajaj Auto Ltd. has rightly been relied upon by the Commissioner of Central Excise (Appeals) and we do not find any infirmity in the order-in-appeal passed by the Commissioner of Central Excise (Appeals). Accordingly, we uphold the same and reject the Revenue's appeal.

Decision:-Appeal rejected.

Comment:-The essence of this case is that as hydraulic jack is an item that is necessarily supplied against each transformer, the credit in respect of duty paid on the same is also admissible.

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PJ/Case Law/2013-14/2008

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