2013 (1) TMI 29 - AT - Central Excise

Cenvat credit on tyres - Whether tyres which are used as part of LDPT can be considered as inputs - Low Profile Dump Truck used in captive mines - Revenue argues that when LDPT cannot be considered as either capital goods or input then its parts also cannot be considered as either capital goods or input - Held that - As nothing in the definition of capital goods or inputs provides for explicitly excluding tyres from either of the definitions. Following the decision in case of RAJASTHAN STATE CHEMICAL WORKS (1991 (9) TMI 73 - SUPREME COURT OF INDIA) that the goods can be considered as inputs. Tyres get used in the process of handling raw materials which is an integral part of manufacturing process. Cenvat credit is allowed on goods which get consumed over a period of time like refractory lining or catalyst. The goods can be considered as inputs and Cenvat Credit is available on tyres of LPDT used by the appellant in mines. - In favour of assessee

Summary

Issues:
1. Whether tyres for Low Profile Dump Truck ("LPDT") qualify as input for availing Cenvat Credit.
2. Whether LPDT can be considered as capital goods or input under Cenvat Credit Rules, 2004.

Analysis:
1. The appellants, manufacturers of Zinc, claimed Cenvat Credit for tyres used in LPDT for transporting ore in captive mines. Revenue argued that tyres cannot be considered input for zinc manufacturing as LPDT is a capital asset falling under Chapter 87 of Central Excise Tariff. The Commissioner (Appeals) upheld Revenue's view, stating LPDT is essentially a motor vehicle and not an input. The Counsel for appellants argued that the transportation process within mines is integral to manufacturing and goods need not be part of the final product to qualify as input. He cited a Kolkata High Court decision supporting credit eligibility for consumables. He also referred to a Tribunal case extending credit for tyres used in dumpers in mines, requesting similar treatment for the appellants.

2. Revenue contended that since LPDT does not fall under the definition of "capital goods," Rule 2(K) of Cenvat Credit Rules, 2004 does not allow credit for parts of such machinery. The explanation in Rule 2(K) includes goods used in manufacturing capital goods, but as LPDT is not a capital good, credit for its parts should be denied. The Tribunal recognized captive mines as part of the factory and noted that LPDT does not qualify as capital goods under Rule 2(a) due to its classification under Chapter 87 of the Central Excise Tariff. The main dispute revolved around whether LPDT can be considered an input under Rule 2(k) despite not being covered under Rule 2(a).

3. Historical provisions excluded capital assets from being considered inputs, but this changed with the introduction of Cenvat credit for capital goods. The Tribunal in a previous case held that goods classified as capital assets cannot be viewed as inputs. The argument centered on the common understanding of "inputs" and "capital goods," with Revenue asserting that LPDT and its parts do not fall under either definition. However, the Tribunal found that while tyres are not capital goods, they can be considered inputs as they are used in the manufacturing process. Cenvat credit was allowed for goods consumed over time, supporting the appellants' claim for credit on tyres used in the manufacturing process.

In conclusion, the Tribunal allowed the appeals, holding that Cenvat Credit is available for tyres of LPDT used in mines, rejecting Revenue's argument that LPDT and its parts do not qualify as capital goods or inputs under the Cenvat Credit Rules, 2004.