2011 (1) TMI 793 - AT - Central Excise

CENVAT credit - Rule 2(a) of CENVAT Credit Rules, 2004, - Pumps, electric motors and accessories received as samples - There is no dispute that they were used in the factory of the assessee who manufactures the final products - As such the decision of the Tribunal in Toyota Kirloskar Motor Ltd. Vs CCE Bangalore 2002 -TMI - 51405 - CEGAT, SOUTH ZONAL BENCH, BANGALORE wherein CENVAT credit was held to be admissible on research and development equipment eventhough it was not used for manufacturing or processing of goods in relation to the final product - Decided in favour of assessee.

Summary

Issues: Disallowance of CENVAT credit on duty paid for pumps, electric motors, and accessories received as samples; Imposition of penalty equal to credit denied.

The judgment dealt with the disallowance of CENVAT credit amounting to Rs.2,07,636/- on duty paid for pumps, electric motors, and accessories received as samples by the assessee. The authorities contended that these goods were neither capital goods nor eligible inputs for credit. The disputed period was from April 2006 to December 2007, and a penalty equal to the denied credit was imposed. The assessee imported or purchased electric motors and pumps, dismantling them to understand the technology used by other manufacturers. The issue revolved around the interpretation of Rule 2(a) of the CENVAT Credit Rules, 2004, defining capital goods. The rule includes goods falling under Chapter 82, Chapter 84, and Chapter 85, used in the factory of the manufacturer of the final products. The Tribunal referred to precedents like Toyota Kirloskar Motor Ltd. Vs CCE Bangalore and CCE Meerut Vs India Glycols Ltd. to support the admissibility of credit on research and development equipment not directly used in manufacturing. Relying on these decisions, the Tribunal accepted the assessee's contention, setting aside the impugned order and allowing the appeal. The operative part of the order was pronounced on 7.1.2011.

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