2013 (5) TMI 167 - AT - Central Excise

Admissibility of cenvat credit - capital goods used for R&D purpose - To avail the Cenvat Credit in terms of the definition under rule 2(a)(A) of the Cenvat Credit Rules, 2004, the only requirement is that such specified capital goods should be used in the factory of the manufacturer in the production of the final products - Held that - The R & D building is whether within the factory premises or not, and the same can be confirmed by the original adjudicating authority. There is no law point involved. The matter is remanded to the Original Adjudicating Authority to verify whether the R & D building is situated within the registered factory premises or not. In case it is situated within the registered factory premises, the Cenvat Credit will be admissible and if not then will not be admissible.

Summary

Issues involved: Admissibility of Cenvat Credit for capital goods used in R&D purpose within factory premises.

Analysis:

1. The main issue in this case revolved around the admissibility of Cenvat Credit for capital goods used for R&D purposes within the factory premises. The Adjudicating Authority noted that the R&D plant was separate from the factory of the manufacturer of the final product, and no final product was processed there. Consequently, the Authority concluded that the capital goods for which Cenvat Credit was availed did not qualify as they were not used in the factory of the final product manufacturer.

2. On the contrary, the Commissioner (A) allowed the appeal by emphasizing that the Cenvat Credit rules required the specified capital goods to be used in the factory of the manufacturer for the production of final products. The Commissioner found that the appellant's R&D lab was situated inside the factory premises and was being used for manufacturing excisable goods. Therefore, the Commissioner held that there was no valid reason to reject the Cenvat Credit availed by the appellants for the R&D center located within the factory.

3. The ambiguity arose regarding the location of the R&D building, whether it was within the registered factory premises or not. While the Adjudicating Authority's findings did not clarify this aspect, the Commissioner (A) explicitly stated that the capital goods were used within the factory premises. The argument put forth was that the confirmation of whether the R&D section was within the registered factory premises or not was a factual matter, not a legal point, and could be verified by the original adjudicating authority.

4. Consequently, the Tribunal remanded the matter to the Original Adjudicating Authority to ascertain the exact location of the R&D building. If the R&D building was within the registered factory premises, the Cenvat Credit would be deemed admissible. However, if the R&D sector was situated outside the registered factory premises, the Cenvat Credit would not be considered admissible. This decision was crucial in determining the eligibility of Cenvat Credit for the capital goods used in the R&D activities within the factory premises.