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2011 (4) TMI 1098 - HC - Central ExciseCenvat credit - items were used in the manufacture of capital goods and parts thereof and, as such, were eligible for CENVAT credit under Rule 2 of the CENVAT Credit Rules, 2002 - Counsel for Central Excise and Customs would submit that the CESTAT had misconstrued Rule 2 of CENVAT Rules and the Explanation thereof; and, in the light of the findings of the original authority that the goods in question were used for repairs of machinery, they did not fall within the ambit of capital goods under Rule 2 of the CENVAT Rules and, as such, no CENVAT credit could be claimed thereupon Held that - capital goods would not only include goods falling under Chapters 82, 84, 85 and 90 of the Central Excise Tariff Act but also components, spares and accessories of such goods, and moulds and dies which are used in the factory of the manufacturer of the final product, but not equipment or appliance used in an office, 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, order of the CESTAT, in rejecting the contention of the Revenue, though cryptic does not give rise to any substantial question of law necessitating interference in proceedings under Section 35G of the Act, appeal is dismissed
Issues:
1. Interpretation of Rule 2(b) of the CENVAT Rules regarding the definition of "capital goods." 2. Eligibility of CENVAT credit for steel sheets and coal used in the factory for fabrication of capital goods and parts thereof. 3. Disallowance of CENVAT credit by the Assistant Commissioner and subsequent appeal process. 4. Application of provisions of Explanation 2 to Rule 2 of the CENVAT Credit Rules and Circular No. 31/90-CX. 8 dated 31-5-1990 by the Commissioner (Appeals). 5. Misconstruction of Rule 2 of CENVAT Rules and the Explanation thereof by the CESTAT. Analysis: The appeal before the High Court of Andhra Pradesh involved the interpretation of Rule 2(b) of the CENVAT Rules concerning the definition of "capital goods." The dispute arose from the disallowance of CENVAT credit by the Assistant Commissioner for steel sheets and coal used in the factory for the fabrication of capital goods and parts thereof. The Commissioner (Appeals) found the items eligible for CENVAT credit under Rule 2 of the CENVAT Credit Rules, 2002, as they were used in the manufacture of capital goods and parts thereof. The Revenue appealed this decision, citing precedents and judgments, but the CESTAT upheld the Commissioner's ruling. The CESTAT highlighted that the goods in question were used in the repairs of capital goods in the manufacturer's factory, falling within the definition of "capital goods" under Rule 2(b) of the CENVAT Credit Rules. The distinction between the manufacturer of the final product and the manufacture of the final product was crucial in determining eligibility for CENVAT credit. During the proceedings, the Senior Standing Counsel for Central Excise and Customs argued that the CESTAT had misconstrued Rule 2 of the CENVAT Rules and the Explanation thereof. However, the High Court affirmed the CESTAT's decision, emphasizing that the goods used for repairs of capital goods within the manufacturer's factory qualified as "capital goods" under Rule 2(b) of the CENVAT Credit Rules. The Court dismissed the central excise appeal, stating that the CESTAT's rejection of the Revenue's contention did not raise any substantial question of law warranting interference under Section 35G of the Act. The appeal was thus dismissed, and no costs were awarded.
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