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2018 (9) TMI 631 - AT - Central ExciseCENVAT Credit - capital goods - angles, channel, CR coil, plates, etc. - Rule 2(a) of Cenvat Credit Rules, 2004 - Whether the appellant is entitled to avail Cenvat credit on inputs used in the fabrication of capital goods which are exempted from payment of duty in terms of Notification No.6/06-CE dt.1.3.2006 and Notification No.67/05-CE dt.16.3.1995 and further used in the manufacture of final products? Held that - Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004 is relevant to decide the issue. As per Explanation 2 to Rule 2(k), the inputs used in the manufacture of capital goods which are further used in the factory of manufacturer are entitled to avail Cenvat credit. Admittedly, in the case in hand, the inputs have been used by the appellant for fabrication of capital goods which are ultimately used in their factory for manufacture of final goods. In that circumstance, it is clear that in terms of Explanation 2 to Rule 2 (k), the appellant is entitled to avail Cenvat credit. Similar view taken in the case of HINDALCO INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., BELGAUM 2008 (5) TMI 202 - CESTAT BANGALORE , where it was held that credit cannot be denied merely for the fact that steel tank are exempted under Notification No. 67/95. Thus, the appellant has correctly availed Cenvat credit on inputs i.e. steel items which have been used for manufacture of capital goods which are exempted from payment of duty and the said capital goods were further used in the manufacture of final products - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Entitlement to avail Cenvat credit on inputs used in the fabrication of capital goods exempted from duty. 2. Interpretation of Rule 2(k) of Cenvat Credit Rules, 2004. 3. Applicability of judicial precedents to the case. Issue-Wise Detailed Analysis: 1. Entitlement to avail Cenvat credit on inputs used in the fabrication of capital goods exempted from duty: The appellant was denied Cenvat credit amounting to ?78,30,427/- on inputs used for fabricating dairy machinery, which is exempt from excise duty under Notification No.6/06-CE and Notification No.67/05-CE. The appellant contended that these inputs, although used to manufacture exempt capital goods, were ultimately used in producing dutiable final products within the factory, thus qualifying for Cenvat credit under Rule 2(k) of the Cenvat Credit Rules, 2004. The Tribunal found that the inputs used for fabricating capital goods, which are further used in the manufacture of final products, are indeed entitled to Cenvat credit as per Explanation 2 to Rule 2(k). 2. Interpretation of Rule 2(k) of Cenvat Credit Rules, 2004: Rule 2(k) defines "input" and includes goods used in the manufacture of capital goods further used in the factory of the manufacturer. The Tribunal emphasized that Explanation 2 to Rule 2(k) explicitly allows Cenvat credit on inputs used to manufacture capital goods, even if the capital goods themselves are exempt from duty, provided they are used within the factory for producing final products. This interpretation was supported by previous judicial decisions, including Hindalco Industries Ltd. and Hindustan Copper Ltd., which clarified that inputs used in the manufacture of capital goods are eligible for Cenvat credit despite the duty exemption on the capital goods. 3. Applicability of judicial precedents to the case: The Tribunal referred to several judicial precedents to support its decision. In Hindalco Industries Ltd., it was held that inputs used in the manufacture of capital goods, which are further used in the factory, qualify for Cenvat credit, even if the capital goods are exempt from duty. Similarly, in Hindustan Copper Ltd., the Tribunal ruled that captively consumed capital goods should not be excluded from the benefit of Cenvat credit merely because they are exempt from duty. The Tribunal also cited Vaidyanath SSK Ltd., where it was concluded that inputs used for manufacturing exempt capital goods are entitled to Cenvat credit if those capital goods are used in the factory for producing final products. Conclusion: The Tribunal concluded that the appellant correctly availed Cenvat credit on inputs used to fabricate capital goods, which were exempt from duty but used within the factory to produce dutiable final products. The impugned order denying the Cenvat credit was set aside, and the appeal was allowed with consequential relief.
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