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2021 (8) TMI 1199 - AT - Central ExciseCENVAT Credit - capital goods - input services - capital goods installed in the Research Development wing - scope of remand proceedings - Section 2(e) of the Central excise Act, 1944 - extended period of limitation - HELD THAT - In the registered premises, appellant should undertake the activities relating to manufacture of the finished goods, it is not necessary that each and every part of the premises should be dedicated to manufacturing of the finished goods, there can be number of parts which undertake the activities such as storage of the raw material and finished goods, administrative activities, development of the product manufactured etc. all such activities are integral to manufacture of the finished products. Admittedly the Research and Development building is not the office of the appellant factory. The only question which needs to be examined whether these Capital Goods are used in the factory of manufacturer. The phrase used in the definition of Capital Goods, is not the same as that in the definition of inputs where it is stated that to qualify as inputs the goods should have been used in or in relation to the manufacture of finished goods. In case of the Capital Goods, the use of Capital Good within the factory of manufacturer whether in or in relation to manufacture of the finished products or otherwise shall make them eligible as Capital Goods in terms of the definition. The observations made by the Commissioner that these capital goods should have been used by the manufacturer in his factory whether directly or indirectly, in or in relation to the manufacture of final products do not find support from the definition of Capital Goods. Since the Capital Goods after the demolition of manufacturing sheds, were shifted within the registered premises from the from the manufacturing shed to the Research and Development Building, the same cannot be said to have been removed from the factory. Undisputedly the CENVAT Credit taken against these Capital Goods when they were received was not disputed by the revenue - In the decision of DELHI CLOTH GENERAL MILLS CO. LTD. VERSUS JOINT SECRETARY, GOVERNMENT OF INDIA 1978 (2) TMI 205 - DELHI HIGH COURT , taking of the goods from one place in the registered premises/ factory to the other place in the same registered premises/ factory do not amount to removal or clearance of the goods. As it is held, the Research and Development Building to be the part of the factory/ registered premises of the Appellant, CENVAT Credit on the input services for use in the said Research and Development building/ activities could not have been denied - It is settled law that CENVAT Credit on the inputs or the input services received by the appellant cannot be denied to the appellant till the time the same are used in the factory of the manufacturer. Extended period of limitation - HELD THAT - All the activities were well within the knowledge of the department as is seen from the various correspondences highlighted by the tribunal in the order remanding the matter back to the original authority. In view of the specific correspondences and declarations referred earlier, there are no justification in invoking the extended period of limitation for making these demands. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of CENVAT credit on capital goods installed in the R&D wing. 2. Eligibility of CENVAT credit on input services used in the construction of the R&D wing. 3. Compliance with procedural requirements for declaring the R&D wing within the registered factory premises. 4. Appropriateness of invoking the extended period of limitation for the demand. Analysis: 1. Eligibility of CENVAT Credit on Capital Goods Installed in the R&D Wing: The primary issue was whether the appellant was entitled to CENVAT credit on capital goods installed in the R&D wing. The Commissioner initially denied this credit, asserting that the R&D wing was not part of the registered factory premises. The Tribunal, however, noted that the Commissioner’s previous finding, which allowed CENVAT credit on capital goods used for research and testing within the registered factory, was not challenged by the Revenue and thus became final and binding. The Tribunal emphasized that the definition of "factory" under Section 2(e) of the Central Excise Act, 1944, includes any premises where excisable goods are manufactured, and this definition should be applied comprehensively. The Tribunal concluded that the R&D wing, being within the registered premises, should be considered part of the factory, and thus, the capital goods installed therein were eligible for CENVAT credit. 2. Eligibility of CENVAT Credit on Input Services Used in the Construction of the R&D Wing: The Commissioner denied CENVAT credit on input services used for constructing the R&D wing, arguing that these services were not used in or in relation to the manufacture of final products. The Tribunal, however, found this reasoning flawed, noting that the definition of "input services" under the CENVAT Credit Rules, 2004, is broad and includes services used directly or indirectly in or in relation to the manufacture of final products. Since the R&D wing was part of the registered factory premises and integral to the manufacturing process, the input services used for its construction were eligible for CENVAT credit. 3. Compliance with Procedural Requirements for Declaring the R&D Wing within the Registered Factory Premises: The Commissioner argued that the appellant failed to declare the R&D wing within the registered factory premises, which was a procedural lapse. The Tribunal, however, found that the appellant had submitted various documents to the department, including applications and installation certificates, indicating that the R&D wing was within the registered premises. The Tribunal noted that the approved ground plan included the R&D wing, and thus, the procedural requirement was met. The Tribunal also highlighted that procedural lapses should not result in the denial of substantial benefits like CENVAT credit. 4. Appropriateness of Invoking the Extended Period of Limitation for the Demand: The Commissioner invoked the extended period of limitation, alleging that the appellant suppressed facts by not declaring the R&D wing. The Tribunal found this invocation unjustified, noting that the department was aware of the R&D wing's existence and activities through various correspondences and declarations. The Tribunal emphasized that the extended period of limitation could not be invoked in the absence of suppression or misstatement of facts. Therefore, the demand for CENVAT credit was barred by limitation. Conclusion: The Tribunal concluded that the appellant was entitled to CENVAT credit on both the capital goods and input services used in the R&D wing, as the wing was part of the registered factory premises. The procedural requirements were met, and the extended period of limitation was not applicable. Consequently, the impugned order was set aside, and the appeal was allowed.
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