2019 (4) TMI 1557 - HC - Central Excise

CENVAT Credit - inputs - Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct and justified in passing the impugned order without examining the eligibility of credit as 'inputs' as defined under Rule 2(k) of the Cenvat Credit Rules, 2004? - HELD THAT - The dispute has to be decided by the Tribunal on the basis of the Rule 2(k) of the Credit Rules, 2004 as substituted with effect from 1st March, 2011 as applicable to the period for which the demand is made i.e. 2015. It is for the Tribunal to examine the case of the Appellant that the said products are in fact used for repairs and maintenance of machinery as claimed and not for making supporting structures for capital goods. If the above claim of the Appellant is correct, it must then decide whether they satisfy the definition of inputs as given in Rule 2(k) of the Credit Rules 2004 existing during the period 2015. Appeal restored to the Tribunal.

Summary

Issues:
Appeal under Section 35G of the Central Excise Act, 1944 challenging the order of the Customs, Excise and Service Tax Appellate Tribunal regarding the eligibility of credit as 'inputs' under the Cenvat Credit Rules, 2004.

Detailed Analysis:

Issue 1: Eligibility of credit as 'inputs' under the Cenvat Credit Rules, 2004
The Appellant, engaged in manufacturing tyres, availed CENVAT Credit on certain products during a specific period. The Deputy Commissioner of Central Excise questioned the eligibility of these products as capital goods or inputs under the Credit Rules 2004. The Commissioner of Central Excise (Appeals) upheld this demand. Subsequently, the Tribunal dismissed the Appellant's appeal, stating that the products did not qualify as inputs under Rule 2(k) of the Credit Rules 2004 or as capital goods under Rule 2(a) of the same rules.

Issue 2: Interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004
The Tribunal's order did not address the Appellant's argument that the products in question were used for repairs and maintenance of machinery, not for making structures to support capital goods. The Appellant contended that the products met the definition of inputs and were not excluded under Rule 2(k) of the Credit Rules 2004. The Court noted a breach of natural justice in the Tribunal's failure to consider this crucial submission, rendering the order unsupported by reasons and unsustainable.

Issue 3: Precedents and Application of Rule 2(k) of the Credit Rules, 2004
The Court distinguished previous decisions cited by the Appellant, emphasizing that they were rendered before the insertion of the exclusion in Explanation 2 to Rule 2(k) of the Credit Rules 2004. As the present case pertained to a period post-2009, these precedents were deemed inapplicable. The Court directed the Tribunal to reexamine whether the products were used for repairs and maintenance of machinery, determining their eligibility as inputs under Rule 2(k) of the Credit Rules 2004 applicable during the relevant period.

In conclusion, the Court set aside the Tribunal's order and remanded the matter for fresh consideration, emphasizing the necessity for the new order to be supported by reasons to adhere to principles of natural justice. The judgment underscored the importance of a thorough analysis of whether the disputed products qualified as inputs under the relevant provisions of the Cenvat Credit Rules, 2004.