2024 (7) TMI 378 - AT - Central Excise

Refund claims in respect of Cenvat Credit on spare parts considering the same as capital goods - Input versus Capital Goods - Refund rejected under the provisions of Section 11B and 12B of the Cenvat Excise Act, 1944 - HELD THAT - As per the insertion of sub clause (v) in the definition of Inputs given in Rule 2(k) of Cenvat Credit Rules, all capital goods having a value upto Rs.10,000/- are included in the definition of Inputs . However, there is no exclusion of these goods from the definition of Capital Goods . The spare parts of the capital goods are also covered under the capital goods. Therefore, it is the option of the assessee either to claim Cenvat Credit in respect of capital goods having a value upto Rs.10,000/- per piece either as capital goods or inputs. It is settled law that when simultaneously two benefits are available to the assessee at a time then the more beneficial provisions should be extended to the assessee. In this regard, support of the Hon ble Supreme Court judgment in the case of SHARE MEDICAL CARE VERSUS UNION OF INDIA 2007 (2) TMI 2 - SUPREME COURT taken, in the said judgment the appellant s claim of Notification No. 64/88-Cus., dated March 1, 1988 was denied. However, during the relevant period the goods of the assessee was also covered under para 3 of the table of exemption. The Hon ble APEX Court held that if the benefit of para 2 of exemption is not available then assessee should be given the benefit under para 3. Accordingly, when two benefits are available it is the option to the assessee to chose the more beneficial. In the present case, appellant have claimed the Cenvat Credit in respect of such spare parts under capital goods which is in order. In the present case the appellant has option to avoid the Cenvat Credit on spare parts either under capital goods or under input. When this be so then condition of the notification No.30/2004-CE does not get violated. Accordingly, the appellants are entitled for the exemption notification No 30/2004-CE and simultaneously, they are also entitled for the Cenvat Credit on the spare parts even though, the value thereof is upto Rs.10,000/- under the category of capital goods - the appellants are legally entitled for the Cenvat Credit. As regard the submission of the appellant that in the event of eligibility of the Cenvat Credit on the parts of the capital goods in the present case they are entitled for the cash refund in terms of Section 142(3) of CGST Act read with Section 11B. The impugned order is set aside - appeal allowed.

Summary

Issues:
Interpretation of exemption notification under Cenvat Credit rules for spare parts of capital goods.

Analysis:
The appellant was availing exemption under notification No. 30/2004-CE but faced confusion regarding whether spare parts of capital goods should be considered as inputs or capital goods. The definition of "Input" was amended, including capital goods up to Rs.10,000 in value. The appellant sought clarification but received no response from the department, leading to filing refund claims for Cenvat Credit on spare parts. The refund claims were rejected under Section 11B and 12B of the Central Excise Act. Appeals were filed before the Commissioner(Appeals) who upheld the rejection, leading to the present appeals before the Tribunal.

The appellant argued that claiming Cenvat Credit on spare parts was necessary to avoid denial of the exemption notification due to the ambiguity in defining inputs and capital goods. They contended that spare parts of capital goods fell under both categories and, therefore, they were entitled to claim the credit under capital goods. The Tribunal agreed with the appellant's interpretation, stating that the spare parts could be considered as both capital goods and inputs. Referring to the amendment in the definition of "Inputs," the Tribunal held that the appellant had the option to claim Cenvat Credit under either category. The principle of choosing the more beneficial provision was cited, supported by a Supreme Court judgment, emphasizing that when two benefits are available, the assessee can opt for the more advantageous one.

Moreover, the Tribunal referenced a Bombay High Court case highlighting that specific provisions override general ones in the context of concessions or exemptions. The appellant's claim for Cenvat Credit on spare parts under capital goods was deemed legitimate and in accordance with the law. The Tribunal concluded that the appellant was entitled to both the exemption notification and the Cenvat Credit on spare parts, even if the value was up to Rs.10,000, under the category of capital goods. Consequently, the Tribunal set aside the impugned orders, allowing the appeals with consequential relief, including cash refund under the CGST Act.