2017 (12) TMI 437 - AT - Central Excise

CENVAT credit - input - M.S. Channel, Angles, M.S Plates etc. used in the repair and maintenance of the capital goods installed in the factory premises - Held that - There is no dispute of the fact that these items were used in the factory for repair and maintenance of the capital goods, hence eligible to credit - reliance placed in the case of Commissioner of Central Excise, Customs And Service Tax, Visakhapatnam-I Versus Jindal Stainless Ltd 2015 (6) TMI 821 - CESTAT BANGALORE - credit allowed. Dutiability - scrap generated during the course of repairing of capital goods on which credit availed without payment of duty - Held that - the Ld. Commissioner(Appeals) has rightly confirmed the order of the adjudicating authority directing recovery of duty with interest on the MS Scrap cleared from the factory without payment of duty. Appeal allowed in part.

Summary

Issues:
Appeal against orders-in-appeal passed by Commissioner(Appeals) Ahmedabad regarding eligibility of CENVAT credit on items used in repair and maintenance of capital goods and clearance of scrap without payment of duty.

Analysis:
The dispute in this case revolves around the eligibility of CENVAT credit for duty paid on items used in the repair and maintenance of capital goods within the factory premises. The key issue is whether these items fall under the definition of 'input' as per Rule 2(k) of CCR, 2004. The Tribunal referred to various judgments like Kisan Sahkari Chini Mills Ltd. case, Commissioner of Central Excise, Customs & Service tax Vs. Jindal Stainless Ltd. case, and Sarjoo Sahkari Chini Mills Ltd. case to analyze this matter. It was noted that the High Courts have held that inputs used for repair and maintenance of plant and machinery are eligible for CENVAT credit, emphasizing the nexus between such activities and the manufacture of final products.

Furthermore, the Tribunal cited the judgment in J.K. Cotton SPG & WVG Mills Co. Ltd. case to highlight the broad scope of 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. The judgment emphasized that activities like repair and maintenance of plant and machinery are essential for smooth manufacturing processes, thereby establishing a direct nexus with the manufacture of final products. It was concluded that goods used in such activities are eligible for CENVAT credit based on their commercial expediency in the manufacturing process.

In light of the facts presented, where the items in question were used for repair and maintenance of capital goods within the factory premises, the Tribunal deemed them eligible for credit. Additionally, the clearance of MS Scrap without payment of duty was also addressed, leading to the confirmation of the recovery of duty with interest on the cleared scrap. However, the penalty imposed was reduced to ?2000 in each case considering the overall circumstances. Consequently, the impugned order was modified to reflect these adjustments, and the appeals were disposed of accordingly.