TMI Blog2015 (12) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... if such goods are received as inputs under the Cenvat Credit Rules, 2002 and to utilize this credit according to the said rules. Clearly a legal fiction has been created in this rule. In normal course duty paid motor vehicle cannot be an input for making same type of motor vehicle. Here the said vehicle is deemed to have been input only because it is brought into the factory for being re-made, refined, re-conditioned or for any other reason. We find the scope for which a duty paid vehicle can be brought to the factory is very wide and includes the processes undertaken by the appellants in the present case - When the vehicle is brought back to the factory for the intended purposes as stipulated under Rule 16 (1) the credit of duty paid on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are carried out by the dealers before the vehicle is sold. If the damage is beyond any repair work that can be done at the dealer's end. Such vehicles are received back into the factory of appellant for being re-made/repair. Number of such vehicles is less than 0.5% of the total clearance by the appellant. 3. Prior to July 2001 the appellants were following procedure under Rule 173H/173L of the erstwhile Central Excise Rules, 1944. After the introduction of Central Excise Rules, 2002 the appellant followed procedure under Rule 16. They have availed Cenvat credit of duty paid at the time of initial clearance of the vehicles which were later returned to the factory because of damage. 4. A dispute arose regarding the eligibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst order dated 31/03/2007 concluded that the appellants are eligible for credit proportionate to the salvaged parts which were used for further manufacturing. He denied credit attributable to completely damage portion/parts of the vehicle which were not salvaged, but were scrapped. The learned Counsel submitted that such conclusion is beyond any legal provision and it is totally untenable; (c) The learned Commissioner's view that the damaged vehicle cannot be treated as input in terms of Rule 2 (k) of the Cenvat Credit Rules, 2004 is totally erroneous as the credit available to them is in terms of deeming provision under Rule 16 (1) of Central Excise Rules. There is no application of Rule 2 (k) in this present context; (d) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a new vehicle. As such, he pleaded that the credit availed on such vehicles cannot be allowed as they are to be considered as scrap only. 6. We have heard both the sides and examined appeal records. The short point for decision is the eligibility of the appellant for the credit of duty paid on the vehicles at the time of their initial clearance which were later brought back to the factory due to damage. The scope and applicability of Rule 16 of Central Excise Rules is required to be examined and decided. Rule 16 of Central Excise Rules, relevant for the present appeals is as below:- RULE 16. Credit of duty on goods brought to the factory - (1) Where any goods on which duty had been paid at the time of removal thereof are brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the duty paid as if such goods are received as inputs under the Cenvat Credit Rules, 2002 and to utilize this credit according to the said rules. Clearly a legal fiction has been created in this rule. In normal course duty paid motor vehicle cannot be an input for making same type of motor vehicle. Here the said vehicle is deemed to have been input only because it is brought into the factory for being re-made, refined, re-conditioned or for any other reason. We find the scope for which a duty paid vehicle can be brought to the factory is very wide and includes the processes undertaken by the appellants in the present case. 8. Rule 16 (2) makes it clear that as to how duty liability of the brought back goods are to be dealt with. If the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but amounts to manufacture of new motor vehicle. The dismantling/salvaging is part and parcel of such manufacturing process. In view of this, we find that credit of duty paid at the time of initial clearance is available in full to the appellants. Apportioning the credit for salvaged and usable parts and non-usable scrap is not having support of any provision of law. Further, it should be noted that while the usable salvaged items were put into manufacturing stream of new vehicle, the unusable items were cleared by the appellant on due payment of duty. As such, there is no legal basis for apportioning the credit into eligible or ineligible component. 10. We find the learned Commissioner's finding that the situation in appellant' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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