2016 (10) TMI 905 - AT - Central Excise

CENVAT credit - items falling under chapter 76, 83,68, 69 of CETA - capital goods in terms of Sub-Clauses of Rule 2(a)(A) of CCR, 2004 or inputs - components/spares/accessories of capital goods - packing materials and insulating materials are used for thermal insulation of the pipes and fittings in order to avoid heat loss - Held that - the definition of inputs in Rule 2(k) of CCR means and includes all goods used in the factory by the manufacturer of the final product. It also includes any goods including accessories, cleared with the final product, the value of which is included in such final product - the definition of inputs during the relevant period under explanation 2 in Rule 2(k) includes goods used in manufacture of capital goods which are further used in the factory of the manufacturer. Further, clause (i) of Rule 2(k) provides input means all goods used in or in relation to manufacture of final products which directly or indirectly and whether contained in final product or not and includes items like lubricating oils, grease, cutting oils etc., in relation to manufacture of final product or for any other purpose within factory of production. I find that most of the items in question have been indisputably utilized in the factory of production of excisable goods and without the use of which the appellant could not have manufactured excisable goods - CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of Cenvat Credit on various items used in manufacturing Sugar and Molasses
- Disallowance of Cenvat Credit by Revenue
- Adjudication of Show Cause Notices
- Appeal before Ld. Commissioner (Appeals)
- Interpretation of items used in repair, maintenance, and fabrication of machinery
- Application of precedents and legal provisions in determining Cenvat Credit eligibility

Analysis:

The judgment revolves around the eligibility of Cenvat Credit on items used in manufacturing Sugar and Molasses. The appellant availed Cenvat Credit on various items falling under different chapters of CETA during 2005-06 to 2009-10. The Revenue proposed disallowance of the credit, contending that the items did not qualify as capital goods under CCR, 2004. The adjudication confirmed the demand, stating that the items were used for thermal insulation and not directly in the manufacturing process of Sugar. Penalties were also imposed under relevant rules.

The appeals were filed challenging the adjudication, which were dismissed by the Ld. Commissioner (Appeals). The appellant argued that the items were essential for repair, maintenance, insulation, and fabrication of machinery necessary for manufacturing Sugar and Molasses. They relied on previous tribunal rulings and High Court judgments to support their claim that items used in repair and maintenance are eligible for Cenvat Credit.

The Tribunal analyzed the definitions of 'input' and 'capital goods' under CCR, 2004 and noted that items used in repair, maintenance, or fabrication of machinery have a nexus with the manufacturing process. Rulings from various courts were cited to emphasize that activities like repair and maintenance are integral to manufacturing and items used in such activities are eligible for Cenvat Credit. The Tribunal also highlighted the broad definition of 'inputs' under Rule 2(k) of CCR, which includes goods used in or in relation to the manufacture of final products.

Considering the precedents and legal provisions, the Tribunal allowed the appeals, setting aside the impugned orders. The appellant was deemed entitled to consequential benefits in accordance with the law. The judgment concluded with the pronouncement in the open court, affirming the eligibility of the items for Cenvat Credit based on their essential role in the manufacturing process of Sugar and Molasses.