Jyoti Balasundaram, Member (J)

1. The issue for determination in this appeal of the Revenue is the admissibility of Modvat Credit of Rs. 4,96,388.42 of floor mats falling under Heading 87.08 of the CET, 1985 supplied by the respondents as accessories with light commercial vehicles manufactured by them. The Assistant Collector disallowed modvat credit availed of for the period from September 1989 to January 1990 on the ground that it cannot be considered as an input "used in or in relation to the manufacture of motor vehicles". The lower appellate authority set aside the demand holding as follows:

"I have gone through the case records. The point for determination is whether credit on 'floor mat' is allowed. The appellants have contested that the floor mats are not manufactured in running lengths but are designed and manufactured to their specifications and that even if it is to be considered as accessory, if supplied with the motor vehicle and of which the value is included in the A.V., it is an input eligible for credit of duty under Rule 57A of Central Excise Rules, 1944. I observe that the Assistant Collector has not given any findings/reasons on the above submissions already made before him. The floor mats are not manufactured in running lengths but are designed/manufactured to the specification given by the appellants. They are so designed that they fit on the floor of the cabin of the motor vehicles. It is irrelevant whether the floor mats are supplied as accessories or otherwise. I also observe that the floor mats have been cleared on payment of duty by its manufacturers under sub-heading No. 8708.00 which covers "parts and accessories of motor vehicles of Heading 87.01 to 87.05. This fact establishes a nexus between floor mats and motor vehicles. Further the subject floor mats are not for general sale since they are specially designed to fit in their L.C.V. I, therefore, hold that "Floor Mats" of which the value is included in the assessable value is an input eligible for credit of duty under Rule 57A of Central Excise Rules, 1944 since these are used in or in relation to the manufacture of final product. The appeal is accepted by setting aside the orders of Assistant Collector with consequential relief."

Hence this appeal.

2. The learned SDR contends that floor mats are not used in or in relation to the manufacture of the final product which is complete even otherwise and it is, therefore, immaterial, whether floor mats are manufactured in running length or made according to specifications. He further submits that inclusion of their value in assessable value is not a relevant factor for consideration for eligibility to Modvat credit under Rule 57A of Central Excise Rules. He cites the decision reported in MANU/CC/0062/1989 : 1989 (44) E.L.T. 578 (Tribunal) in the case of Sundaram Clayton Ltd. v. Collector of Central Excise, Coimbatore wherein Modvat credit has been disallowed on tool kits on the ground that they do not at all participate in the process of manufacture of mopeds and seeks to draw an analogy therefrom.

3. In reply, learned Counsel, Shri Lakshmikumaran, submits that Modvat credit is available to floor mats which are admittedly specifically designed and supplied along with LCVs as they are used in relation to the manufacture of motor vehicles inasmuch as they serve to insulate the vehicle and act as heat resistors to the cabin floor. He submits that it is not essential for the purpose of Rule 57A that the input should have participated in the process of manufacture and draws our attention to the judgment of the Hon'ble Supreme Court in the case of Collector of Central Excise v. Jay Engineering Works Ltd. reported in MANU/SC/0084/1988 : 1989 (39) E.L.T. 169 (SC) wherein the benefit of proforma credit under Notification 201/79 was extended to fan nameplates. He cites the decision of the East Regional Bench of the Tribunal in the case of TELCO reported in 1991 (32) ECR 165 allowing Modvat credit for tool kit a