2013 (5) TMI 136 - AT - Central Excise

Cenvat credit on channels, Angles, Plates, H.R. Sheet etc. disallowed - Held that - When the fact that the items, in question, have been used for repair and maintenance of the plant and machinery that is, for fabrication of the parts of machinery which had got worn out and have to be replaced, is not disputed, in view of the judgments of Ambuja Cement Eastern Ltd. vs. CCE, Raipur (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) and Hindustan Zinc Ltd. vs. Union of India(2008 (7) TMI 55 - HIGH COURT RAJASTHAN) the inputs used for repair and maintenance of machinery would be eligible for cenvat credit. Since repair and maintenance is an activity which is essential for smooth manufacturing operations and without regular repair and maintenance, manufacturing activity is not commercially feasible, the inputs used for repair and maintenance of the plant would be eligible for cenvat credit. The appeal is allowed.

Summary

Issues:
1. Eligibility of cenvat credit for items used in repair and maintenance of plant and machinery.

Analysis:
The appellant, a manufacturer of sugar chargeable to central excise duty, claimed cenvat credit for items used in the repair and maintenance of plant machinery during the period from 2005-06 to 2007-08. The Department contended that these items were not eligible for cenvat credit, leading to a confirmation of cenvat credit demand by the Jurisdictional Deputy Commissioner. The Commissioner (Appeals) upheld this decision, prompting the appellant to file an appeal challenging the disallowance of cenvat credit.

The appellant argued that the items in question, used for repair and maintenance of plant machinery, were eligible for cenvat credit. They cited judgments from various High Courts to support their claim. On the other hand, the Department defended the decision, referring to a judgment from the Hon'ble A.P. High Court to assert that the items were not eligible for cenvat credit.

Upon reviewing the submissions and records, the Tribunal noted that the usage of the items for repair and maintenance of machinery was not disputed. While the Commissioner (Appeals) relied on a Tribunal judgment to uphold the disallowance of cenvat credit, the Tribunal highlighted judgments from the Hon'ble Chhattisgarh, Rajasthan, and Karnataka High Courts supporting the eligibility of inputs used for repair and maintenance of machinery for cenvat credit. The Tribunal emphasized the nexus between the items, repair, and maintenance activities, stating that without regular maintenance, manufacturing operations would not be commercially feasible. Therefore, the Tribunal held that the impugned order disallowing cenvat credit was not sustainable and allowed the appeal in favor of the appellant.