2014 (3) TMI 346 - AT - Central Excise

Waiver of pre deposit - Denial of CENVAT Credit - Credit denied on items used for repairs or maintenance of capital goods in the appellant s cement plant - Appellant contends that they have used the steel items for such repairs or maintenance of capital goods - Adjudicating authority have proceeded on the premise that the steel items were claimed to have been used in the fabrication/manufacture of capital goods - Held that - It is true that the appellant was consistently claiming Cenvat credit on the aforesaid items by treating them as capital goods falling under Rule 2(a)(A) ibid. They took the credit in question in RG 23C Part II, 50% thereof in one financial year and the rest in a subsequent year. At no stage before did they make any alternative claim - The steel items in question are claimed to have been used for repairs/maintenance of capital goods by way of replacement of old/worn out parts/components of such capital goods. This factual plea is to be seen throughout the records - If findings of Revenue is presumed to be correct for a moment, then there is a prima facie case for holding that the steel items were used in the manufacture of capital goods and, hence, by virtue of the aforesaid Explanation to the definition given under Rule 2(k), such steel items could be considered as inputs . In this prima facie view of the matter, we have found a good case for waiver and stay - Stay granted.

Issues:
1. Challenge against denial of Cenvat credit on steel items used for repairs or maintenance of capital goods.
2. Alternative contention regarding classification of steel items as 'inputs' for Cenvat credit.
3. Interpretation of the definition of 'inputs' under Rule 2(k) of the Cenvat Credit Rules, 2004.
4. Application of the Explanation to the definition of 'inputs' in the context of steel items used for repairs or maintenance of capital goods.
5. Comparison between repairs/maintenance of capital goods and manufacture of capital goods for Cenvat credit eligibility.
6. Consideration of waiver and stay against the demand and penalty imposed.

Analysis:

1. The appellant filed an application seeking waiver and stay against the demand of Cenvat credit denied on steel items used for repairs or maintenance of capital goods. The denial was based on the contention that the steel items were used in the fabrication/manufacture of capital goods rather than for repairs or maintenance.

2. The appellant challenged the demand on merits and limitation grounds. They argued that the steel items should qualify as 'inputs' for Cenvat credit under Rule 2(k) of the Cenvat Credit Rules, 2004. The appellant referred to the second Explanation to the definition of input, stating that goods used in the manufacture of capital goods further used in the factory should be considered as inputs.

3. The Tribunal considered the appellant's alternative claim under Rule 2(k) despite the appellant not making such a claim earlier. The steel items were claimed to have been used for repairs/maintenance of capital goods by replacing old/worn out parts. The Tribunal noted the distinction made by the Commissioner between fabricating/manufacturing of capital goods and repairs/maintenance.

4. The Tribunal analyzed the applicability of the Explanation to the definition of 'inputs' in the context of the steel items used for replacement of worn out parts of capital goods. They distinguished between welding electrodes used for repairs and steel items used for replacement, stating that the latter become part of the capital goods. The Tribunal found a prima facie case for waiver and stay based on this distinction.

5. The Tribunal referenced a High Court judgment that differentiated between repairs/maintenance of capital goods and manufacture of capital goods regarding Cenvat credit eligibility. They emphasized that steel items used for replacement become part of capital goods, unlike welding electrodes used for repairs.

6. Considering the prima facie case in favor of the appellant, the Tribunal granted waiver of pre-deposit and stay of recovery as requested, concluding the judgment in the appellant's favor.

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