2024 (4) TMI 785 - HC - Central Excise

CENVAT Credit - inputs - denial on the ground that the use of such goods for repair and maintenance of plant and machinery by the respondent assessee cannot be considered to have been used in or in relation to the manufacture of final products as they are not used coextensively in the process of manufacturing of the petroleum products by the respondent assessee - HELD THAT - Considering the fact that the Tribunal has relied upon the decision in the respondent assessee s own case as well as in view of the fact that now the issue is no more res-integra in view of the decision of the Hon ble Supreme Court in case of Kisan Co-operative Sugar Factory Ltd. 2023 (12) TMI 1303 - SUPREME COURT wherein the Hon ble Apex Court has held that the interpretation of the expression used in or in relation to manufacture is of a very wide import and takes within its scope and ambit all items used in the process of manufacture whether directly or indirectly and whether contained in the final product or not. The items used for maintenance of plant and machinery are also items used in the manufacture of finished goods. Hence credit on the items used for maintenance repair upkeep or fabrication of plant and machinery are admissible to the assessees. Entitlement on the Cenvat credit on the M/s. Gratings/G.I. Coated Gratings - HELD THAT - In view of the observation made by the Tribunal in 2020 (2) TMI 749 - CESTAT AHMEDABAD it is observed that the M.S. Gratings were used as accessory for supporting and holding for approaching how to plant and processing units of refinery and platforms for approaching or reaching out the plant is part and parcel of the entire plant and machinery particularly in large scale manufacturing unit without which the operation of the plant is not possible. It was therefore held by the Tribunal that therefore the M.S. Gratings used as accessory in such structure is used in relation to the manufacture of final product - the Tribunal has not committed any error in following a Coordinate Bench s decision in the case of the respondent assessee itself. There is no error committed by the Tribunal giving rise to any question of law much less any substantial question of law arising from the impugned order - Appeal dismissed.

Summary

Issues Involved:

1. Interpretation and application of the definition of 'Capital Goods' u/s Rule 2(a)(A) of the Cenvat Credit Rules, 2004.
2. Applicability of Cenvat Credit on goods used for repair and maintenance u/s Rule 2(k) of the Cenvat Credit Rules, 2004.
3. Reliance on non-final judgments and judicial discipline.
4. Setting aside the Adjudicating Authority's order on recovery of wrongly availed Cenvat Credit.

Summary:

Issue 1: Definition of 'Capital Goods'
The Revenue questioned whether the CESTAT erred in interpreting 'Capital Goods' u/s Rule 2(a)(A) of the Cenvat Credit Rules, 2004, by allowing Cenvat Credit on items like "Welding Electrodes," "Welding filler Wires," and "M.S. Gratings/G.I. Coated Gratings." The Commissioner of CENVAT had denied credit, arguing these items were not used "in or in relation to the manufacture of final products" and thus not integrally connected to the manufacturing process.

Issue 2: Goods for Repair and Maintenance
The Revenue argued that CESTAT overlooked Rule 2(k) of the Cenvat Credit Rules, 2004, by allowing credit on goods used for repair and maintenance of Plant & Machinery, which do not qualify as 'inputs.' The Adjudicating Authority held that the items were not used for manufacturing the final product and lacked evidence of use in manufacturing capital goods for captive consumption. The Tribunal, however, found that items used for maintenance are admissible as they are used in relation to the manufacture of finished goods.

Issue 3: Reliance on Non-final Judgments
The Revenue contended that CESTAT relied on judgments that were not final, thus disregarding judicial discipline. The Tribunal's reliance on previous decisions in the respondent's own case and other similar cases was upheld, as the issue was considered settled by the Hon'ble Supreme Court in Kisan Co-operative Sugar Factory Ltd., which interpreted "used in or in relation to manufacture" broadly.

Issue 4: Recovery of Wrongly Availed Cenvat Credit
The Tribunal set aside the Adjudicating Authority's order demanding recovery of Rs. 1,56,73,968/-, finding that the items in question were used in relation to the manufacture of final products. The Tribunal noted that M.S. Gratings used as accessories for plant operations were essential and thus eligible for Cenvat Credit.

Conclusion:
The High Court found no error in the Tribunal's judgment, which was consistent with the Supreme Court's interpretation. The appeal was dismissed, affirming the respondent's entitlement to Cenvat Credit on the disputed items.