2022 (9) TMI 62 - AT - Central Excise

CENVAT Credit - inputs - HR Coils and welding electrodes used for lining the plant and in its maintenance - Rule 2 (k) of CCR, 2004 or not - HELD THAT - As may be seen all goods used in the factory by the manufacturer all final products qualify as inputs under CCR. Therefore, Cenvat credit is admissible on such goods. There is no dispute that the welding electrodes were used for maintenance of the plant and the HR Coils/Sheets were used in making lining around the furnaces in the plant. Evidently, the plant will be within the factory. Since the HR Coils as well as the welding electrodes are used within the factory of manufacturer, Cenvat credit is admissible on both as inputs. This issue is no longer resintegra and the jurisdictional High Court of Andhra Pradesh has, in the case of SREE RAYALASEEMA HI-STRENGTH HYPO LTD. VERSUS COMMR. OF CUS. C. EX., TIRUPATI 2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT held that the goods in used their repair and maintenance qualify as inputs under Rule 2 (k) of CCR. The appellant is entitled to Cenvat credit as inputs on the HR Coils/Sheets and welding electrodes used in repair and maintenance of the capital goods. The impugned order cannot, therefore, be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 2(k) of Cenvat Credit Rules, 2004 regarding qualification of HR Coils/Sheets and welding electrodes as inputs.

Analysis:
The appeal in this case was filed against the order-in-appeal dated 13.07.2018, where the Commissioner (Appeals) upheld the decision of the Assistant Commissioner denying Cenvat credit on HR Coils/Sheets and welding electrodes used by the appellant for lining around furnaces and maintenance of capital goods. The Assistant Commissioner issued a show cause notice alleging that these items did not qualify as inputs under Rule 2(k) of Cenvat Credit Rules, 2004. The Assistant Commissioner ordered the recovery of the Cenvat credit and imposed a penalty on the appellant. The Commissioner (Appeals) affirmed this decision, leading to the current appeal.

The central question in this case was whether HR Coils/Sheets and welding electrodes used for lining the plant and maintenance of capital goods qualify as inputs under Rule 2(k) of Cenvat Credit Rules, 2004. The relevant part of Rule 2(k) defines "input" as goods used in the factory by the manufacturer of the final product. The appellant argued that since these items were used within the factory premises, they should be considered as inputs eligible for Cenvat credit. The Member (Technical) analyzed the definition of "input" under Rule 2(k) and concluded that all goods used in the factory by the manufacturer of the final product qualify as inputs under CCR, making Cenvat credit admissible on such goods.

Moreover, the Member (Technical) referred to a judgment by the jurisdictional High Court of Andhra Pradesh in a similar case, where it was held that goods used in repair and maintenance qualify as inputs under Rule 2(k) of Cenvat Credit Rules, 2004. Citing this precedent, the Member (Technical) held that the appellant is entitled to Cenvat credit on HR Coils/Sheets and welding electrodes used for repair and maintenance of capital goods. Consequently, the impugned order denying the Cenvat credit was set aside, and the appeal was allowed in favor of the appellant.

In conclusion, the judgment clarified the interpretation of Rule 2(k) of Cenvat Credit Rules, 2004 regarding the qualification of HR Coils/Sheets and welding electrodes as inputs. The decision emphasized that goods used in repair and maintenance activities within the factory premises are eligible for Cenvat credit as inputs, aligning with the definition provided under the relevant rule.