2015 (7) TMI 1125 - AT - Central Excise

Cenvat credit - lubricant oil used in dumpers and water sprinkler - lubricant is used in heavy earth moving machines, which are used for production of coal and water sprinkler has been used for controlling pollution within the mining area - Held that - since the disputed goods are used in or in relation to production of excisable goods, I am of the view that the said goods fall under the purview of the definition of input for availment of cenvat credit. Further, lubricant used for smooth functioning of water sprinkler, which is used for controlling pollution in the mining area as per the requirement of mines Act, in my opinion, will also qualify as input for the purpose of cenvat benefit. The definition of input contained in Rule 2 (k) of the Cenvat Credit Rules, 2004 entitles a manufacturer to take cenvat credit on all goods except the excluded goods itemized there in. Since lubricants are not falling under the negative list of goods mentioned in the definition clause, credit cannot be denied to the appellant. - Decided in favour of appellant

Summary

Issues: Denial of cenvat credit on lubricant oil used in dumpers and water sprinkler.

Analysis:
1. The appellant argued that lubricant oil is essential for heavy earth moving machines used in coal production to prevent heat generation due to mechanical friction, which could adversely affect the manufacturing process. Additionally, the water sprinklers, used for pollution control in mining areas as per regulatory requirements, also require lubricant for proper functioning. The appellant contended that both lubricants should qualify as inputs or capital goods, making the duty-paid lubricant eligible for cenvat credit.

2. The respondent, represented by the ld. D.R., upheld the findings of the impugned order, maintaining the denial of cenvat credit on the lubricants in question.

3. The Tribunal analyzed the usage of lubricants in heavy machinery for coal production and water sprinklers for pollution control within mining areas. Considering that these goods are used in or in relation to the production of excisable goods, the Tribunal concluded that they fall within the definition of inputs eligible for cenvat credit. Referring to Rule 2(k) of the Cenvat Credit Rules, 2004, which permits manufacturers to claim credit on all goods not excluded, the Tribunal found that lubricants were not part of the excluded goods. Therefore, the Tribunal ruled in favor of the appellant, stating that the denial of cenvat credit was unjustified.

4. Consequently, the Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant, emphasizing that the lubricants used in dumpers and water sprinklers were eligible for cenvat credit as they qualified as inputs under the relevant rules.

This detailed analysis of the judgment addresses the issues raised regarding the denial of cenvat credit on lubricant oil used in dumpers and water sprinklers, providing a comprehensive overview of the arguments presented by both parties and the Tribunal's reasoning leading to the final decision in favor of the appellant.