2018 (3) TMI 601 - AT - Central Excise

CENVAT credit - Mill Plates, TMT bars, MS Angle, Channel, Joists, Mill Plate, G.C. Sheet, Chequred Plate - Rule 2 (a) readwith Rule 2 (k) readwith Rule 2 (l) of Cenvat Credit Rules, 2004 - Held that - although production may be theorically possible without repair and maintenance but in all practically production of dutiable finished goods is not possible when repair and maintenance of plant and machinery, capital goods. For their repairs is also synomious to the world re-manufacture - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allowability of Cenvat credit on specific items for the period July 2010 to January 2011 and November 2009 to April 2010.

Analysis:
The dispute revolved around the allowability of Cenvat credit on various items as per show cause notices issued by the Revenue. The issue was adjudicated upon contest, resulting in the confirmation of the proposed demand with interest and penalties. The appellant then appealed to the Commissioner (Appeals), who upheld the disallowance of Cenvat credit but reduced the penalty for the period July 2010 to January 2011. Subsequently, the appellant approached the Tribunal, arguing that a similar matter had been decided in their favor by a coordinate bench of the Tribunal in a previous case. Additionally, they cited rulings from the Hon'ble Rajasthan High Court and the Supreme Court, along with a previous Tribunal decision in their favor under similar circumstances.

The appellant contended that the items in question were essential for the operation and maintenance of the plant and machinery, directly contributing to the manufacturing process of excisable goods. They emphasized that without proper repair and maintenance, the machinery would not function correctly, impeding the production of dutiable finished products. The appellant highlighted the necessity of periodic maintenance to replace worn-out parts, asserting that these activities were crucial for the manufacturing process.

On the other hand, the Revenue argued that Cenvat credit for inputs was permissible for the fabrication and construction of capital goods but not for repair and maintenance activities. They relied on a decision from the Hon'ble Andhra Pradesh High Court to support their stance.

After considering the arguments presented by both parties, the Tribunal analyzed the definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004. The Tribunal found that the disputed items fell within the definition of inputs as they were used directly or indirectly in the manufacturing process of final products. The Tribunal noted that while production might be theoretically possible without repair and maintenance, in practical terms, the production of dutiable finished goods would be hindered without proper maintenance of plant and machinery. The Tribunal emphasized that repair and maintenance activities were essential for the functioning of machinery, akin to re-manufacturing.

Consequently, the Tribunal held in favor of the appellant, allowing Cenvat credit on the disputed items. The impugned order was set aside, and the appellant was entitled to consequential benefits as per the law.