2011 (3) TMI 349 - HC - Central Excise

Cenvat credit - Rule 2 of the Cenvat Credit Rules, 2002 - Disallowed Cenvat credit in respect of steel sheets and coal used within the factory for fabrication of capital goods and parts thereon - Held that - goods mentioned in clauses (i) to (iii) of Rule 2(b), and which are used in the manufacturer s factory, which fall within the ambit of capital goods - Hence, the goods in question are, admittedly, used in the repairs of capital goods in the factory of the manufacturer and, as such, fall within the ambit of Section 2(b)(ii) of the Cenvat Credit Rules - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 2 of the Cenvat Credit Rules regarding eligibility for Cenvat credit.
2. Determination of whether goods used for repairs of machinery qualify as "capital goods" under Rule 2(b) of the Cenvat Credit Rules.

Analysis:
1. The appeal was filed under Section 35G of the Central Excise Act against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The dispute revolved around the disallowance of Cenvat credit for steel sheets and coal used in the factory for fabrication of capital goods and parts. The Commissioner allowed the credit, citing Rule 2 of the Cenvat Credit Rules, 2002. The Revenue appealed, but the CESTAT upheld the Commissioner's decision, referencing relevant legal precedents and Circular No. 31/90-CS8. The CESTAT noted the detailed analysis by the Commissioner and dismissed the Revenue's appeals.

2. The key contention was whether the goods used for repairs of machinery could be considered "capital goods" under Rule 2(b) of the Cenvat Credit Rules. The rule defines "capital goods" to include specific categories of goods used in the manufacturer's factory for the final product. The court emphasized that goods used for repairs of capital goods in the factory would fall within the definition of "capital goods." It clarified that only goods used in the manufacture of the final product in the manufacturer's factory could qualify as "capital goods" under Rule 2(b). Since the disputed goods were used for repairs of capital goods in the factory, they were deemed to fall within the ambit of the rule. Consequently, the court dismissed the central excise appeal, highlighting that the CESTAT's decision did not raise any substantial legal questions warranting intervention under Section 35G of the Act. No costs were awarded in the judgment.