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2015 (1) TMI 1292 - AT - Central ExciseEligibility of Cenvat credit - whether the capital goods brought to the factory for R&D work during the period from March 08 to November 2012 would be eligible for Cenvat Credit or not? - Held that - The definition of capital goods in as given Rule 2(a) of Cenvat Credit Rules, 2004 covers the goods listed in this sub Rule, which have been used in the factory of manufacture of final product . Thus, for capital goods Cenvat Credit, their use in or in relation to manufacture of final product is not required and their use in the factory of manufacture for the any purpose whether in or in relation to manufacture or for any other purpose including R&D would be enough for permitting the Cenvat Credit. In view of this, the impugned order is not sustainable. The same is set aside. The appeals are allowed in favour of assessee.
Issues involved: Eligibility of capital goods for Cenvat Credit for R&D work.
Analysis: The main issue in this case was whether capital goods used for R&D work between March 2008 and November 2012 were eligible for Cenvat Credit. The Commissioner had denied the credit, stating that such goods were not used in or in relation to the manufacture of the final product. The Commissioner's order imposed a penalty and confirmed the demand for Cenvat Credit amounting to Rs. 9,97,38,882. The appellants challenged this decision. The definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 includes goods used in the factory of manufacture of the final product. The Bench clarified that for capital goods Cenvat Credit, it is not necessary that the goods are used directly in the manufacture of the final product. Any use of capital goods in the factory of manufacture, whether for manufacturing purposes or for other activities like R&D, would suffice for claiming Cenvat Credit. Based on this interpretation, the Bench found the Commissioner's order unsustainable and set it aside. Consequently, the appeals were allowed, and the Department's applications for early hearing were dismissed as the matter had been resolved. In summary, the judgment clarified that capital goods used in the factory for any purpose, including R&D activities, are eligible for Cenvat Credit under the Cenvat Credit Rules, 2004. The decision emphasized that the key requirement is the use of capital goods within the factory of manufacture, rather than their direct involvement in the manufacturing process.
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