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Commissioner of Central Excise, Nagpur Versus KEC International Ltd.

Entitlement to claim cenvat credit on barbed wire being accessory to the transmission tower - whether the said accessory falls in the definition of ‘input' as contained in Section 2(k) of the Cenvat Credit Rules, 2004? - Held that:- All the conditions are fulfilled in this case inasmuch as barbed wire is essentially required for smooth operation of the transmission tower and secondly, as per the terms and conditions of the agreements, it is necessary for the company to supply barbed wire along w .....

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the respondent supplied barbed wire to all its customers and as per the terms and conditions of the agreement, the price of barbed wire is included in the assessable value. The learned counsel for the respondent placed reliance in the case of Coca-Cola India Pvt. Ltd. vs. CCE, Pune [ 2009 (8) TMI 50 - BOMBAY HIGH COURT ] wherein held that burden of service tax may be borne by the ultimate consumer and not by any intermediary and if the value of the input or input service has been included in th .....

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he order-in-original. 2. Briefly the facts of the case are that the respondent is engaged in the manufacture of transmission line towers and parts thereof falling under Chapter Heading No. 73082011 of the Central Excise Tariff Act, 1985 and avails cenvat credit facility under Cenvat Credit Rules, 2004. The process of manufacturing transmission line towers mainly consists of two major activities i.e. fabrication and galvanizing. During the scrutiny of the records of the assessee, it was observed .....

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site to discourage general public to climb such transmission tower. The barbed wire is nothing but used for safety and security of the transmission tower and has nothing to do with the functioning of the tower. It has further been alleged that the respondent in most of the cases, except M/s. Powergrid Corporation of India Ltd., does not supply the barbed wire for sale / erection of transmission line tower. Separate invoice is prepared for clearance of such barbed wire from the factory of the as .....

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dered its recovery along with interest and also imposed equal penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Further, a penalty of ₹ 2,00,000/- has also been imposed under Rule 25(a) & (d) of the Central Excise Rules, 2002. Being aggrieved by the order, the assessee filed appeal before the Commissioner (Appeals) who vide his order-in-appeal dated 15.6.2010 set aside the order-in-original and allowed the appeal keeping in v .....

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Cenvat Credit Rules, 2004 as it cannot be considered as input. He further submitted that the input is eligible for cenvat credit only if used in or in relation to the manufacture of final products. He also submitted that in the present case, barbed wire is neither used in or in relation to final product whether directly or indirectly nor is contained in the final product and there is no nexus with the manufacturing process. He further submitted that barbed wire is not supplied by the assessee t .....

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is not essentially required for the operational needs of the transmission line tower and therefore does not fall in the category of accessory' of the final product. He further submitted that the decisions relied upon by the Commissioner (Appeals) are not applicable to the instant case in view of the following cases:- (i) NGEF Ltd. vs. CCE, Bangalore reported in 1995 (77) ELT 238 (T); (ii) CCE, Chennai vs. Sundaram Brake Linings reported in 2010 (19) STR 172 (T). 4. On the other hand, the le .....

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s of something else; (b) An extra piece of equipment useful but not essential or that can be added to something else as a decoration; (c) Accessories means items which enhance the functioning and operation of the main goods whether it is plant, machinery of equipment. 4.1 He further submitted that barbed wire is an anti-climbing device and the same is highly useful in protecting electric tower sub-station from any human or animal climbing and safeguards them from any damage threat. The transmiss .....

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tioned in all the agreements entered into by the respondent with all its customers. In all the agreements, barbed wire is specifically mentioned as anti-climbing device and therefore the accessories to be delivered along with the tower. He further submitted that the conditions laid down by the Tribunal in the case of Jayshree Industries vs. CCE reported in 1993 (63) ELT 492, are fully satisfied in this case and therefore barbed wire being accessory is covered in the definition of input contained .....

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(T); (ii) Ultrapack vs. CCE, Hyderabad reported in 2005 (192) ELT 540 (T); (iii) CCE, Surat vs. Bothra Exports Pvt. Ltd.reported in 2006 (205) ELT 562 (T). 4.2 He further submitted that the department never raised any objection while including the value of the barbed wire in the assessable value and therefore the respondent is entitled to take credit of duty paid on barbed wire applying the ratio of the judgment rendered in the case of Bothra Exports Pvt. Ltd. cited supra. He also submitted that .....

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(T); (iii) CCE vs. Textile Corpn. Marathwada Ltd. reported in 2008 (231) ELT 195 (SC). 4.3 He further submitted the following judgments to support his argument that penalty should not be levied when the issue involved is interpretation of statutory provisions:- (i) Sona Wires Pvt. Ltd. vs. CCE, Raipur reported in 1996 (87) ELT 439 (T); (ii) Aquamall Water Solutions Ltd. vs. CCE, Bangalore reported in 2003 (153) ELT 428 (T). 5. I have heard the learned counsel for the parties and perused the mat .....

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l oil and motor spirit, commonly known as petrol, use 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 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 of steam used in or in relation to manufacture of final products or for any other pu .....

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1418) held as under:- "Para 10. We find that the term "accessories"is used in the schedule to describe goods which may have been manufactured for use as an aid or addition. A sense in which the word accessory is used is given in Webster's Third New International Dictionary as follows : "an object or device that is not essential in itself but that adds to the beauty, convenience or effectiveness of something else."Other meanings given there are : "supplementary .....

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l Officer - 1991 (51) E.L.T. 173 (S.C.), wherein while holding car seat covers as accessories to motor vehicles and thus exigible to sales tax, the Hon'ble Court observed as under: "…..In our view the correct test would be whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty, elegance or comfort for the use of the motor vehicle or a supplementary or secondary .....

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use of the vehicle. Another test may be whether a particular article or articles or parts, can be said to be available for sale in an automobile market or shops or places of manufacture;if the dealer says it to be available certainly such an article or art would be manufactured or kept for sale only as an accessory for the use in the motor vehicle. Of course, this may not also be a conclusive test but it is given only by way of illustration. Undoubtedly some of the parts like axle, steering, ty .....

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e motor vehicles or for adding elegance to the seat. 6.3 Similarly, in case of M/s. Pragati Silicons Pvt. Ltd. v. CCE Delhi - 2007 (211) E.L.T. 534 (S.C.), the term "accessory"was considered and various definitions of the same appearing in the same was taken note of. The term "accessory"as defined in The New Collins Concise Dictionary of the English Language (1982) as "a supplementary part or object, as of a car, appliance, etc. . Other definitions for the accessory are .....

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he case of CCE vs. Jay Engineering Works reported in 1989 (39) ELT 169 (SC), provided the answers to the following questions are in the affirmative: (a) Whether the items are essentially required for the operational needs of the gadget; (b) Whether they are compulsorily supplied with the gadget at the point of delivery through the factory gate; (c) whether its value is included in the value of the gadget at the factory gate. 7. Now the question is whether in the case of respondent all the essent .....

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