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2013 (10) TMI 229 - AT - Central ExciseCENVAT Credit Capital Goods or inputs - credit on Racks - Revenue was of the view that the item could not be considered as an accessory of any machinery in their factory and would not qualify to be capital goods as per the definition of the said expression under Rule 2 of the Cenvat Credit Rules, 2004 - Held that - Following Banco Products (India) Ltd. Vs Commissioner of Central Excise, Vadodara 2009 (2) TMI 101 - CESTAT AHMEDABAD - There is nothing in the definition of input, which would exclude an item like racks from the scope of the definition - Such construction can be achieved only by relying on the old understanding of the word inputs ignoring the legal definition given under Rule 2(k) of the Cenvat Credit Rules, 2004, which is not a proper approach - the credit claimed by the appellant was allowed and the orders of the lower authorities set aside - the items will squarely fall within the definition of inputs and it will not be justified to deny credit on these items - They have taken credit on these items by classifying the same as capital goods but that by itself cannot be reason to deny credit when they are eligible for credit by classifying it as inputs Decided in favour of Assessee.
Issues:
1. Classification of Racks for Cenvat credit as capital goods or inputs. Analysis: The case involved a dispute regarding the classification of Racks for Cenvat credit by the appellant, a manufacturer of various agricultural products. The Revenue contended that the Racks did not qualify as capital goods under the Cenvat Credit Rules, 2004, and issued a Show Cause Notice for recovery of the credit taken. The appellant argued that the Racks were essential for their manufacturing process and cited conflicting views from different Tribunal Benches on the issue. The matter was referred to a Larger Bench of the Tribunal, which held that such items fell within the definition of inputs and should not be denied credit. The appellant had classified the Racks as capital goods but argued that they were eligible for credit even if classified as inputs. The learned counsel for the appellant emphasized the importance of the Racks in their manufacturing process and highlighted the inconsistency in Tribunal decisions on similar cases. The appellant's position was that denying credit on the Racks, even if classified as capital goods, would be unjustified based on the Tribunal's previous ruling. The appellant sought relief from the Tribunal by challenging the order of the Commissioner (Appeals) who had upheld the denial of credit. The Revenue, on the other hand, argued that the Racks could not be considered as accessories to any machinery in the factory, as claimed by the appellant. The Authorized Representative contended that for an item to be considered an accessory, it should be linked to a specific machinery, which was not the case in the appellant's factory. Additionally, the Revenue asserted that items like Racks, with characteristics of capital assets, should not be classified as inputs, as they do not get consumed in the manufacturing process. The Commissioner (Appeals) had already examined and concluded that such items could not be considered as inputs, supporting the denial of credit. In delivering the judgment, the Tribunal referred to the decision of the Larger Bench in a similar case, emphasizing the importance of following established precedents unless overturned by a higher authority. The Tribunal disagreed with the Commissioner (Appeals) and the Revenue's arguments, noting that the definition of input under the Cenvat Credit Rules did not exclude items like Racks. The Tribunal criticized the reliance on outdated interpretations and legal definitions, stating that the denial of credit based on such grounds was improper. Consequently, the Tribunal allowed the appeal, setting aside the orders of the lower authorities and granting the appellant the credit claimed on the Racks.
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