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2016 (12) TMI 1680 - HC - Central ExciseCENVAT/MODVAT credit - inputs used for making capital goods in the nature of M.S. Plates, M.S. Channels, M.S. Joists, etc. - main argument raised is that the user test has not been dealt with - Held that - the Commissioner has specifically dealt with the functional usage of the various parts. User test as laid down in the Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III 2009 (8) TMI 14 - SUPREME COURT only provides that the authority should be satisfied that the use of these inputs is necessary for erection of the whole or part of the plant and machinery, which is essential for manufacture of the end product. It is not disputed that the inputs like M.S. Angles, M.S. Plates, M.S. Joists and Channels were used for manufacturing of certain essential parts of the factory which are capital goods and since they are essential parts of the factory, they satisfy the twin tests of being capital goods as well as the user test. Credit rightly allowed - appeal dismissed - decided against Revenue.
Issues Involved:
1. Eligibility of Modvat/Cenvat credit on inputs used for making capital goods. 2. Interpretation of the term "input" under Rule 57Q and Rule 2(g) of the Cenvat Credit Rules, 2002. 3. Application of the user test as laid down in Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III. 4. Relevance of Supreme Court judgments in similar contexts. Issue-wise Detailed Analysis: 1. Eligibility of Modvat/Cenvat Credit on Inputs Used for Making Capital Goods: The core issue revolves around whether the assessee is entitled to claim Modvat credit on inputs like M.S. Plates, M.S. Channels, and M.S. Joists used for making capital goods essential for cement manufacturing. The Customs, Excise & Service Tax Appellate Tribunal, New Delhi, ruled in favor of the assessee, allowing the credit. The Revenue's appeal against this decision was rejected by the High Court, affirming that these inputs qualify for Cenvat credit as they are integral to the manufacturing process. 2. Interpretation of the Term "Input" under Rule 57Q and Rule 2(g) of the Cenvat Credit Rules, 2002: The term "input" is defined broadly under Rule 2(g) of the Cenvat Credit Rules, 2002, to include all goods used in or in relation to the manufacture of final products. Explanation 2 explicitly includes goods used in the manufacture of capital goods, which are further used in the factory. The High Court emphasized that the definition of "input" is comprehensive and covers almost everything except specified fuels, thereby supporting the assessee's claim for credit on the disputed items. 3. Application of the User Test as Laid Down in Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III: The user test requires that the authority be satisfied that the inputs are necessary for the erection of the whole or part of the plant and machinery essential for manufacturing the end product. The High Court noted that the Commissioner (Appeals) had adequately addressed the functional usage of the inputs and concluded that they are essential for cement manufacturing. Thus, the user test was deemed satisfied. 4. Relevance of Supreme Court Judgments in Similar Contexts: The High Court referred to several Supreme Court decisions, including Jayaswal Neco Ltd. v. Commissioner of Central Excise, Raipur, which supported a broad interpretation of "input" and affirmed that goods used in manufacturing capital goods qualify for credit. The court distinguished the case of Saraswati Sugar Mills v. Commissioner of Central Excise, Delhi-III, noting it dealt with an exemption notification rather than the rules in question. The High Court reiterated that the legislative intent is to grant Cenvat credit for all inputs directly or indirectly related to manufacturing the final product. Conclusion: The High Court dismissed the Revenue's appeal, upholding the Tribunal's decision that the inputs used by the assessee for manufacturing essential parts of the cement factory qualify for Cenvat credit. The ruling emphasized a broad interpretation of "input" under the Cenvat Credit Rules, 2002, aligning with precedents set by the Supreme Court.
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