2010 (9) TMI 827 - AT - Central Excise

Cenvat credit - materials were used for repairs and maintenance of machinery within the factory itself - Casting Powder, for instance, was used in Continuous Casting Department. This powder was put into moulds for ensuring free flow of hot liquid steel without sticking to the walls of the moulds. - Held that - no mention of all the items in the Revenue s appeal either. matter of remand of the case to the lower appellate authority, order set aside and appeal allowed by way of remand to the Commissioner (Appeals)

Summary

Issues:
1. Grant of Cenvat Credit on certain materials
2. Definition of 'inputs' under Rule 2(g) of the Cenvat Credit Rules, 2002
3. Denial of Cenvat Credit on the ground of availment of exemption under Notification No. 65/95-C.E.

Issue 1: Grant of Cenvat Credit on Certain Materials
The appeal revolves around the question of whether the lower appellate authority was correct in granting Cenvat Credit on specific materials that the appellant argued did not qualify as 'inputs' under Rule 2(g) of the Cenvat Credit Rules, 2002. The Original Authority disallowed the credit amounting to Rs. 22,94,251/- to the respondent, which the appellate authority later allowed after determining that the materials fell within the scope of the definition of input under Rule 2(g). The Revenue raised three grounds against this decision: insufficiency of documentary evidence, goods used for repairs/maintenance not being covered by the definition of input, and the issue of interest on duty and penalty.

Issue 2: Definition of 'Inputs' under Rule 2(g) of the Cenvat Credit Rules, 2002
The core argument presented by the Revenue is that the benefit of Cenvat Credit cannot extend to commodities not directly or indirectly used in or in relation to the manufacture of the final product within the factory. The Revenue contended that items used for repairs/maintenance of machinery would not qualify as inputs. The appellant cited various judicial decisions to support their claim, including a High Court judgment on welding electrodes used in repairs/maintenance of plant and machinery being considered as inputs under Rule 2(g). The debate also touched upon the exclusion of goods used for repairs/maintenance of capital goods from the definition of inputs.

Issue 3: Denial of Cenvat Credit on the Ground of Availment of Exemption
The Original Authority disallowed the Cenvat Credit based on the use of materials in the workshop for the manufacture of exempted capital goods, which were then used for repairs or maintenance of machinery within the factory. However, the appellate authority's decision seemed to lack clarity regarding the actual use of the materials by the respondent and the impact of exemption under Notification No. 65/95-C.E. The judgment highlighted the need for a detailed examination of each item for which the Cenvat credits were availed to determine their qualification as inputs under Rule 2(g.

In conclusion, the Tribunal set aside the impugned order and remanded the case to the Commissioner (Appeals) for a detailed assessment of whether each item for which the Cenvat credits were claimed could be considered as inputs under Rule 2(g) of the Cenvat Credit Rules, 2002. The Commissioner (Appeals) was instructed to provide a comprehensive explanation after examining the specific use of each item and considering relevant case law, ensuring the respondent's right to a fair hearing.