2017 (9) TMI 147 - AT - Central Excise

CENVAT credit - inputs - MS Channels, MS Plate, MS Angle etc. used the same for repair and maintenance of the capital goods installed in the factory - Held that - This issue has been considered in the judgements of the cases of Kisan Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise, 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 - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Eligibility of CENVAT credit on items used for repair and maintenance of capital goods within the factory.

The judgment by the Appellate Tribunal CESTAT AHMEDABAD addressed the appeal against an order-in-appeal dated November 26, 2015, concerning the eligibility of CENVAT credit on certain items used for repair and maintenance of capital goods within a factory. The appellant had availed CENVAT credit on duty paid items like MS Channels, MS Plate, and MS Angle for repair and maintenance purposes, leading to a Show Cause Notice for recovery of a specific amount. The dispute revolved around whether these items were eligible for credit as per the definition of input under Rule 2(k) of CCR, 2004. The Tribunal referred to judgments in similar cases, such as Kisan Sahkari Chini Mills Ltd. and others, to analyze the issue. The Tribunal highlighted that the use of goods for repair and maintenance of plant and machinery is crucial for smooth manufacturing processes, as malfunctioning equipment would hinder production. The Tribunal emphasized that the nexus between the activity of repair and maintenance and the manufacture of final products determines the eligibility of items for CENVAT credit. Citing the Apex Court's interpretation in J.K. Cotton SPG & WVG Mills Co. Ltd. v. Sales Tax Office, the Tribunal concluded that the expression "used in or in relation to manufacture of final products" in the definition of input under Rule 2(k) of the Cenvat Credit Rules, 2004, covers goods essential for the manufacturing process, even if not directly incorporated into the final product. Ultimately, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as per the law.