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2017 (8) TMI 349 - AT - Central ExciseCENVAT credit - whether M.S. Bar, M. S. Joints, M. S. Sheets etc, undisputedly used for the repair and maintenance of various capital goods, in the factory premises of the appellant are eligible to CENVAT credit under the definition of input as prescribed under Rule 2 (k) of CCR, 2004? - Held that - similar issue decided in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW 2013 (7) TMI 2 - CESTAT NEW DELHI , where it was held that 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 - appeal allowed - decided in favor of appellant.
Issues:
- Eligibility of CENVAT credit on items used for repair/maintenance of capital goods. - Interpretation of Rule 2(k) of CCR, 2004. - Application of judgments in similar cases. - Nexus between repair/maintenance activities and manufacture of final products. Analysis: Issue 1: Eligibility of CENVAT credit on items used for repair/maintenance of capital goods: The appellant availed CENVAT credit on items like M.S. Bar, M. S. Joints, M. S. Sheets used for repairs/maintenance of capital goods dryers and silos machines. A notice was issued for recovery of credit, which was confirmed along with interest and penalty. The appeal was filed against the order, arguing that the items used for repair/maintenance of capital goods are eligible for credit under Rule 2 (K) of CCR, 2004. The Tribunal analyzed previous judgments and held that goods used for repair and maintenance of plant and machinery are eligible for CENVAT credit. The Tribunal emphasized the commercial necessity of repair and maintenance activities for the smooth functioning of manufacturing processes, making the goods used in such activities eligible for credit. Issue 2: Interpretation of Rule 2(k) of CCR, 2004: The Tribunal considered the definition of 'input' as prescribed under Rule 2(k) of CCR, 2004 to determine the eligibility of items like M.S. Bar, M. S. Joints, M. S. Sheets for CENVAT credit. The Tribunal highlighted that the scope of the expression 'used in or in relation to manufacture of final products' in the definition of 'input' is broader than 'used in manufacture of,' covering goods that are commercially expedient in the manufacturing process. This interpretation supported the eligibility of items used for repair and maintenance activities to qualify for CENVAT credit. Issue 3: Application of judgments in similar cases: The appellant cited judgments like Kisan Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise and others to support their contention regarding the eligibility of items for CENVAT credit. The Tribunal referred to various High Court judgments, including the Hon'ble Rajasthan High Court and Hon'ble Chhattisgarh High Court decisions, which held that inputs used for repair and maintenance of plant and machinery are eligible for CENVAT credit. The Tribunal emphasized the importance of following precedents set by multiple High Courts in similar cases. Issue 4: Nexus between repair/maintenance activities and manufacture of final products: The Tribunal emphasized the direct nexus between repair and maintenance of plant and machinery with the manufacture of final products. It highlighted that the repair and maintenance activities are essential for smooth manufacturing processes and that goods used in such activities are crucial for the manufacturing of final products. The Tribunal concluded that the nexus between repair/maintenance activities and the manufacture of final products is a key factor in determining the eligibility of items for CENVAT credit. In conclusion, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as per the law. The judgment reaffirmed the eligibility of items used for repair and maintenance of capital goods for CENVAT credit, based on the interpretation of Rule 2(k) of CCR, 2004 and the established nexus between such activities and the manufacture of final products.
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