2018 (12) TMI 89 - AT - Central Excise

CENVAT Credit - input - lubricants /greases used in the dumpers, which are used by the appellant in their Mines for the transport of extracted ores - Violation of Rule 3 of Cenvat Credit Rules, 2004 - recovery of CENVAT Credit alongwith demand of Interest and penalty - Held that - The only criteria for admissibility of cenvat credit on input are that same must be used in the factory of the manufacturer of the final product. In the present case, there is no dispute that the dumpers in question are being used for transporting the extracted ore in the Mines of the appellant. Ore is an input of the appellant herein and the entire Mines is the place of manufacture. In the given circumstances, disputed goods are used in relation to the manufacture of final product of the appellant and accordingly, very well qualify aforesaid definition of input and thus are eligible for availment of credit. The adjudicating authorities below have passed the orders in sheer ignorance of the amendment in the definition of input. Their order is therefore not sustainable - appeal allowed - decided in favor of appellant.

Issues:
1. Alleged wrongful availment of cenvat credit on lubricants oil and grease.
2. Violation of Rule 3 of Cenvat Credit Rules, 2004.
3. Appeal against the order of Additional Commissioner.
4. Interpretation of the definition of "input" under Rule 2(k) of CCR.
5. Eligibility of lubricants/greases used in dumpers as inputs.

Issue 1: Alleged wrongful availment of cenvat credit on lubricants oil and grease.
The Department alleged that the appellants wrongly availed cenvat credit on lubricants oil and grease used in material transporting vehicles/dumpers during a specific period. A show cause notice was issued proposing recovery of the allegedly wrongly availed credit, along with interest and penalty. The Additional Commissioner confirmed the proposal in an order, leading to the appeal.

Issue 2: Violation of Rule 3 of Cenvat Credit Rules, 2004.
The violation of Rule 3 of Cenvat Credit Rules, 2004 was alleged due to the wrongful availment of cenvat credit on lubricants oil and grease. The order of the Additional Commissioner imposed recovery, interest, and penalty based on this violation.

Issue 3: Appeal against the order of Additional Commissioner.
The appellant, aggrieved by the order of the Additional Commissioner, preferred an appeal before the Commissioner (Appeals). However, the Commissioner (Appeals) upheld the order and rejected the appeal, leading to the appellant approaching the Tribunal for further redressal.

Issue 4: Interpretation of the definition of "input" under Rule 2(k) of CCR.
The key contention revolved around the interpretation of the definition of "input" under Rule 2(k) of the Cenvat Credit Rules. The appellant argued that dumpers used for transporting extracted ores qualify as capital goods, making lubricants used in them eligible for credit as inputs related to the manufacture of the final product.

Issue 5: Eligibility of lubricants/greases used in dumpers as inputs.
The Tribunal analyzed whether the lubricants/greases used in the dumpers, which were employed by the appellant in their Mines for ore transport, could be considered eligible inputs. The definition of "input" under Rule 2(k) of CCR was crucial in determining the eligibility of these lubricants/greases for cenvat credit.

The Tribunal considered the narrow issue of whether the lubricants/greases used in the dumpers by the appellant qualified as eligible inputs under Rule 2(k) of CCR. The definition of "input" was pivotal, emphasizing that the machinery in which the input is used must be capital goods. The Tribunal found that the disputed goods were indeed used in relation to the manufacture of the final product, meeting the criteria for cenvat credit eligibility. The Tribunal cited precedents and highlighted the importance of the definition of "input" in determining the admissibility of credit.

The Tribunal noted the amendment in the definition of "input" which excluded only specific items like light diesel oil, high-speed diesel oil, and motor spirit oil, but not lubricants/greases. Relying on this amendment and case law, the Tribunal concluded that the adjudicating authorities had overlooked this crucial change, rendering their orders unsustainable. Consequently, the Tribunal set aside the orders and allowed the appeal in favor of the appellant, highlighting the significance of the amended definition in determining cenvat credit eligibility.

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