2016 (8) TMI 843 - AT - Central Excise

Cenvat credit - duty paid on various items like lining plates HRCS lifters coolers etc. used in the Clinker and Hammer etc. - used for replacement repair and maintenance of their Clinker and other machines - Held that - the issue is no more res integra and stands decided by various High Courts where some of the decisions were upheld by Supreme Court where it was held that repairs and maintenance of plant and machinery is an activity without which smooth manufacturing is not possible. Commercially manufacturing activity is not possible with malfunctioning machines and leaking tanks pipes and tubes. Therefore the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat Credit. Therefore the assessee is eligible for Cenvat credit. - Decided in favour of assessee with consequential relief

Summary

Issues Involved:
Whether the appellant is entitled to avail Cenvat Credit on duty paid on various items used in the replacement, repair, and maintenance of their machines.

Analysis:
The Appellate Tribunal CESTAT New Delhi, comprising Ms. Archana Wadhwa, Member (Judicial) and Shri V. Padmanabhan, Member (Technical), considered the issue of availing Cenvat Credit on duty paid items like lining plates, HRCS lifters, coolers, etc., used in the repair and maintenance of machines. The Tribunal noted that the issue has been previously addressed by various High Courts. The Tribunal specifically referred to a decision of the Hon'ble High Court of Andhra Pradesh in a case where welding electrodes used in repairs and maintenance were deemed as non-modulated items. However, the Tribunal distinguished this decision by highlighting other High Court decisions, including those from Chhattisgarh, Karnataka, and Rajasthan, which supported the eligibility of goods used in repair and maintenance activities for Cenvat Credit.

The Tribunal emphasized the importance of repair and maintenance activities for smooth manufacturing processes, stating that such activities are essential for the manufacture of final products. The eligibility of inputs for Cenvat Credit is determined by the nexus between the activity in which the inputs are used and the manufacture of final products. The Tribunal cited the criteria of commercial essentiality for determining this nexus. Several decisions of the Tribunal, such as in the cases of Panipat Co-operative Sugar Mills Ltd. and Metrochem Industries Ltd., further supported the eligibility of goods used in repair and maintenance activities for Cenvat Credit.

Ultimately, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant. The decision was dictated and pronounced in open court, affirming the appellant's entitlement to avail Cenvat Credit on duty paid items used in the repair and maintenance of their machines.