2021 (4) TMI 384 - AT - Central Excise

CENVAT Credit - inputs/capital goods - corrugated profile sheets - prefabricated modular - cealing panel/wall panel/PVC conduits/wall to ceiling coving/wall to wall coving/single doors/double doors/locks etc., - these were used for creating Clean Room and Clean room is required for maintaining temperature control and RH control - HELD THAT - Admittedly, the appellant have used the disputed inputs for fabrication of clean room, which is essential for manufacture of their dutiable goods, as such clean room is necessary for maintaining proper temperature and hygiene as well as keeping the RH factor in control, and without it manufacture of dutiable medicines is not possible - Further, under Rule 2(k) of CCR, inputs means, all goods used in the factory of the manufacturer of final products . The appellant is entitled to cenvat credit on the items in dispute as inputs - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of cenvat credit on items used for creating a clean room.
2. Interpretation of the definition of 'input' under Rule 2(k) of CCR, 2004.

Analysis:
Issue 1: The appellant, engaged in manufacturing pharmaceuticals, purchased various items to create a clean room for maintaining temperature and RH control essential for pharmaceutical production. Revenue disallowed cenvat credit on these items, considering them neither capital goods nor inputs. The show cause notice proposed disallowance of credit and penalty, which was confirmed in the order-in-original. The Commissioner (Appeals) upheld the decision, leading to the appellant's appeal before the Tribunal.

Issue 2: The appellant argued that the items in dispute were used as inputs for fabricating the clean room, essential for manufacturing pharmaceuticals. Referring to Rule 2(k) of CCR defining 'input' as all goods used in the manufacturer's factory, the appellant contended that the credit should be allowed as inputs. The Revenue, however, relied on a previous Tribunal ruling that clean rooms cannot be considered capital goods or their components for credit eligibility.

The Tribunal, after considering the contentions, found that the clean room was crucial for maintaining proper conditions necessary for pharmaceutical production. Recognizing the definition of 'inputs' under Rule 2(k) of CCR as all goods used in the factory for manufacturing final products, the Tribunal held that the appellant was entitled to cenvat credit on the disputed items as inputs. Consequently, the impugned order disallowing the credit was set aside, and the appeal was allowed, granting the appellant consequential benefits as per the law.