ORDER
R.K. Abichandani, J. (President)
1. This appeal is preferred against the order dated 17.8.2004 made by the Commissioner (Appeals), Indore allowing the departmental appeal against order-in-original dated 17.3.2003 of the Assistant Commissioner, by which the demands of Rs. 70268/- under show cause notice dated 28.12.2001 and Rs. 57,232/- under show cause notice dated 23.12.2002 were dropped against the appellant, by holding that modvat credit taken by the appellant on first-aidkit/box in the vehicle manufactured and removed by them was not permissible.
2. The appellant was engaged in the manufacture of motor vehicles falling under chapter 87 of the schedule to the Central Excise Tariff Act, 1885 and was availing cenvat facility under the Rule 57AB of the Central Excise Rules, 1944/Rule 3 of Cenvat Credit Rules, 2001/Rule 3 of Cenvat Credit Rules, 2002. During scrutiny of the records of the assessee, it was observed that, it had taken cenvat credit on first-aidkit/box of Rs. 70268/- during the period from December 2000 to October 2001 and Rs. 57232/- during the period December 2001 to October 2002. According to the Revenue, since the first-aidkit/box was not used in or in relation to manufacture of vehicle directly or indirectly and was provided alongwith the vehicle as an additional kit for first-aid purpose, the availment of cenvat credit in respect thereof was not admissible, because it did not fall under the definition of “input”. Two show cause notices were therefore issued in respect of the said two periods, and on the basis of the material on record, the Assistant Commissioner held that the first-aid box was used in relation to the manufacture of the vehicle because in Rule 180 of the M.P. Motor Vehicle Rules, 1994, there was a provision to the effect that every “stage carriage” shall carry a dust proof first-aid box. It was held that considering the statutory requirement enforced by the State Government, first-aid kit box was used in relation to the manufacture of motor vehicle and hence was “input” as contemplated in Rule 57AA(d) of the said rules. It was, therefore, held that the demand under the show cause notices could not be sustained. The Commissioner (Appeals), however, was of the view that first-aid box/kit cannot be called as an accessory of the final product (motor vehicle). It was held that the requirement of Rule 180 of the M.P. Motor Vehicle Rules, 1994, requiring first-aid box/kit in every vehicle, did not create an obligation on the manufacturer to supply such first-aid box/kit, which can be procured even from outside for compliance of the provision of Rule 180 of those rules. It was held that Rule 180 of M.P. Motor Vehicle Rules, 1994 applied to stage carriage and public service vehicle and these may not be applicable to the vehicle carrying goods. It was held that even though the value of first-aid box/kit was included in the value of the vehicle cleared by the assessee, the credit of duty paid on such first-aid box/kit would not be available to the assessee as, such first-aid box/kit cannot be considered as an “input” for the manufacture of the vehicle during the relevant period.
3. The appellant had filed notes on 7.9.2006 and 27.9.2006 making written submissions and requesting to decide the appeal on merits on their basis. In the written submissions dated 7.9.2006, the appellant has relied upon the meaning of the word ‘accessory’ from the dictionaries. It has also relied upon the meaning of word ‘input’ in Rule 57AA(d) during the period December 2000 to June, 2002, and the definition of word ‘input’ in Rule 2(f) which was applicable during the period from July 2001 to October 2002. On the basis of these definitions, it is submitted that accessories of the final product if cleared along with the final product were to be treated as “input”. Reliance is also placed on Rule 180 of the M.P. Motor Vehicles Rules and Rule 192 of the Maharashtra Motor Vehicles Rules which provided that the motor vehicles must contain first-aid kit/box. It is submitted that the case law referred to by the department had no application because it related to the earlier period when the definition of the word ‘input’ was different. The appellant has placed reliance on the following decisions:
(i) Collector of C.E. v. Jay Engineering Works Ltd.
(ii) Collector of Central Excise v. Swaraj Mazda
(iii) Tata Engineering & Locomotive Co. Ltd. v. State of Bihar reported in 1993 (74) ELT 193.
4. In their written submissions filed with the note dated 27.9.2006, after referring to the written submissions filed earlier on 7.9.2006, the appellant have relied upon the decision of the Hon’ble Supreme Court in Commissioner v. Maruti Udyog Ltd. reported as 2006 ELT 197 A84 confirming the order of the Tribunal in which it was held that clock assembly fitted in the export and deluxe vehicles were essential components for making the final product, hence were “input”. It is submitted that the motor vehicles not fitted with the first-aid box were not marketable in view of the provision of the Motor Vehicles Act.
5. There is no dispute over the fact that value of the first-aid box/kit was included in the value of the vehicles, when the vehicles were cleared by the appellant on payment of duty. The relevant period under consideration covered by the two show cause notices was from December 2000 to October 2001 and December 2001 to October 2002.
5. Under Rule 57A(1) read with explanation (e) which was inserted w.e.f. 29.6.95 “inputs” included accessories of the final product cleared alongwith such final product, the value of which was included in the assessable value of the final product. Under the new scheme contained in new Rules 57-A and 57-I introduced vide Notification No. 13/2000 made effective from 1st April 2000, the word ‘input’ was defined in Rule 57A(d) to mean “all goods used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and whether used as packaging material, or as fuel, or for generation of electricity or steam, except high speed motor spirit commonly known as petrol”.
5.1 Thereafter Rules 57AA to 57AK were substituted w.e.f. 1.4.2000 for Rules 57A to 57U and the word ‘input’ was defined in Clause (d) of Rule 57AA(1) as under:
(d) “Input” means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants.
(emphasis added).
[Explanation 1.] -The high Speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
[Explanation 2 – Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture.]
5.2 Thereafter, for the period 1st July 2001 to October 2002, the word ‘input’ was defined in Rule 2(f) of the Cenvat Credit Rules 2001 as under:
Input means all goods, except high speed diesel oil and motor spirit commonly known as petrol, used in or in relation to manufacture of final products, whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production.
(emphasis added).
The definition remains the same under Rule 2(g) of Cenvat Credit Rules, 2002.
5.3. It will be seen from the definitions of “input” applicable at the relevant time that accessories of the final products cleared alongwith the final product were included in the definition of input for the purpose of availing modvat /cenvat credit under the scheme.
6. The short question that arises for consideration is whether first-aid kit/box should be treated as an accessory of the final product namely, motor vehicle since it was cleared alongwith the final product and therefore be considered as “input” for the purpose of admissibility of the modvat/cenvat credit. The word “accessory” has a much wider connotation than the word “part” in relation to manufacture of final product. Accessories would not be contained in the final product, yet they would be for use in relation to the manufacture of the final products directly or indirectly. The rules do not provide any catalogue of accessories and therefore, the meaning of the word “accessories” may be understood in relation to the nature of the final product manufactured and the type of accessories in relation to which it is used. In the present case, the final product of the appellant -manufacturer was motor vehicle falling under chapter 87 of the schedule to the Central Excise Tariff Act, 1985. Under chapter heading 8708, there is a reference to parts and accessories of motor vehicles of heading 8701 to 8705. There is no specific reference to first-aid box /kit as an accessory but there are residuary entries under which the item can fall if it is to be treated as an accessory of a motor vehicle.
7. It is not necessary for the purpose of considering eligibility to avail modvat credit that the manufacturer must be under an obligation to supply the accessory alongwith the vehicle. A manufacturer may choose to supply certain accessories along with the vehicle manufactured while another manufacturer may not supply the same accessory but may supply different type of an accessory. The crucial aspect to be noted is that, for the purpose of eligibility to avail modvat credit, such accessories would be treated as “inputs” when they are used in relation to manufacture of the vehicle directly or indirectly. The first-aid kit/box was admittedly supplied along with the vehicle manufactured by the appellant. The relevance of first-aid kit /box as an accessory in relation to the motor vehicle is required to be examined with a view to know whether the appellant was entitled to avail modvat in respect of the value of first-aid kit/box supplied along with the vehicles manufactured by them. In this context, it will be noticed from the provisions of the Motor Vehicles Act and the Rules that the law has recognized the safety aspect in respect of the motor vehicles which often get involved in accidents resulting in injuries that require on the spot first-aid. Under Section 134 of the Motor Vehicles Act, 1988, duty is enjoined upon the driver of the vehicle, in case of accident and injury to a person, to take to all reasonable steps to secure medical attention for the injured person when any person is injured as a result of an accident in which the motor vehicle is involved. Similar provision was contained in the earlier corresponding provision of Section 89 of the Motor Vehicles Act, 1939.
7.1 Rule 31 of the Central Motor Vehicles Rules 1989, which provides for a syllabus for imparting instructions in driving of motor vehicles provides under sub-heading “K. FIRST-AID” for the following topic:
K. FIRST-AID
1. Introduction to first-aid.
2. Outline of first-aid.
3. Structure and functions of the body.
4. Dressings and bandages.
5. The circulation of the blood.
6. Wounds and haemorrhage.
7. Haemorrhage from special regions.
8. Shock.
9. Respiration.
10. Injuries to bones.
11. Burning scales.
12. Unconsciousness (insensibility).
13. Poisons.
7.2 Even the applicants for motor driving schools and establishments contemplated under Rule 24 are required to maintain apparatus, equipments and requirements including a fully equipped first-aid box for use in emergency at the premises under Sub-rule (3)(vi)(n) of the Rule. In short, the Act and the rules made thereunder consider the first-aid treatment of persons injured in the motor vehicle to be of utmost importance. The State Governments have framed rules requiring motor vehicles to be fitted with first-aid kit box keeping in view the anxiety of the legislature to provide immediate help by way of medical aid to the person injured by the motor vehicle. The provision of first-aid kit box in the motor vehicle being manufactured by a company is, therefore, required to be viewed in the background of the statutory concern of the Parliament reflected in the Motor Vehicles Act and Rules made under it to provide immediate medical first-aid to the person injured by the motor vehicle. Providing of a first-aid kit/box, alongwith the motor vehicle manufactured, as an accessory would, therefore, obviously be a use in relation to the manufacture of the vehicle. Supply of such accessory alongwith the vehicle which answers the concern of the law clearly makes such accessory useful in relation to the vehicle manufactured, as a standby provision in the vehicle for giving first-aid to the injured person. The fact that first-aid kit can be obtained from a source other than the manufacturer of the vehicle, which has impressed the Commissioner (Appeals), is wholly irrelevant to the case where the manufacturer chooses to use such first-aid kit in relation to manufacture of vehicles by him for supplying alongwith them. They would clearly be accessories which will be included in the definition of ‘input’ so as to entitle the appellant to avail modvat credit in respect of the value of the such inputs which admittedly was included in the value of the vehicle manufactured and removed on payment of duty.
8. For the foregoing reasons, the impugned order of the Commissioner (Appeals) cannot be sustained and is hereby set aside. The order-in-original stands restored. This appeal is accordingly allowed.
[Dictated and pronounced in the open Court on 20.10.2006]