2017 (10) TMI 330 - AT - Central Excise

CENVAT credit - inputs - H.R. Coils, Plates, SS Sheets, M.S. Channels, Angle, Beam, Bars etc., used for repair and maintenance of Capital goods installed in the factory - Held that - there is no dispute of the fact that these items were used in the factory for repair and maintenance of the capital goods in the factory - the issue has been considered in the case of Commissioner of Central Excise, Customs And Service Tax, Visakhapatnam-I Versus Jindal Stainless Ltd 2015 (6) TMI 821 - CESTAT BANGALORE , where it was held that impugned goods were used in conjunction with certain capital goods/machinery, they become a part of the machinery as they were used for upkeep of the machinery - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of CENVAT credit on items used for repair and maintenance of capital goods.

Analysis:
The case involves an appeal against an order-in-appeal passed by the Commissioner (Appeals-I) Rajkot regarding the availing of CENVAT credit on items like MS Angles, MS Plates, and MS Pipes used for repair and maintenance of capital goods in a factory. The appellant faced a Show Cause Notice for alleged ineligibility of credit, leading to demands for recovery for different periods. The demand was confirmed during adjudication, but the penalty was dropped. The Ld. Commissioner (Appeals) upheld the decision, prompting the current appeal.

The appellant argued that the items in question were used for repair and maintenance of capital goods, making them eligible for credit as per the definition of 'input' under Rule 2(k) of CCR, 2004. They cited precedents like Shree Kamrej Vibhag Sahakari Khand Udyog Mandli Ltd. and other cases to support their claim. On the other hand, the Revenue's representative supported the findings of the Ld. Commissioner (Appeals).

The Tribunal delved into the core issue of whether the duty paid on the disputed items used for repair and maintenance of capital goods qualifies for CENVAT credit under the defined 'input' criteria. Referring to previous judgments, the Tribunal highlighted the importance of the nexus between the activity of repair and maintenance with the manufacture of final products. It emphasized that the goods used in such activities are eligible for CENVAT credit if they are commercially essential for the manufacturing process. The Tribunal also drew parallels with relevant High Court and Supreme Court decisions to support its reasoning.

Ultimately, the Tribunal found that the disputed items were indeed used for repair and maintenance of capital goods within the factory premises. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief as per the law. The judgment underscored the crucial connection between repair and maintenance activities and the smooth functioning of manufacturing processes, affirming the eligibility of CENVAT credit in such cases.