2024 (11) TMI 123 - AT - Central Excise

Recovery of allegedly inadmissible credit alongwith interest and penalty - inputs or not - allegation against the appellant was that credit of duty paid, on inputs used exclusively in the research and development (R D) division of the appellant, had continued to remain on their books despite the non-dutiability of the products emanating from the said division - HELD THAT - The Tribunal in their own dispute in FORCE MOTORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE I 2018 (4) TMI 466 - CESTAT MUMBAI , relating to the immediately succeeding period, i.e., April 2013 to December 2013 has held that ' Considering the wide latitude offered for availment of credit, and in the absence of any allegation that research and development is not concerned with manufacture of the appellant, the disallowance of Cenvat credit does not find favour and must be set aside.' The impugned order is set aside - appeal allowed.

Summary

Issues: Alleged inadmissible credit under CENVAT Credit Rules, 2004 for the period from January 2009 to March 2013, along with applicable interest and penalty.

The judgment pertains to an appeal against the recovery of allegedly inadmissible credit under rule 14 of CENVAT Credit Rules, 2004, for the period from January 2009 to March 2013, along with applicable interest and penalty. The appellant contended that the products used exclusively in the 'research and development (R&D)' division were eligible as inputs under rule 2(k) of the CENVAT Credit Rules, 2004, as they were used in the manufacture of final products in various plants. The Tribunal referred to a previous decision in Force Motors Ltd v. Commissioner of Central Excise, Pune-I, which emphasized that goods used in the research and development wing of a manufacturing facility could be eligible for credit if they contributed to the output for the purposes of credit availment. The Tribunal also cited the definition of 'manufacture' in the Central Excise Act, 1944, to support the contention that activities incidental or ancillary to production could still constitute manufacture. The judgment further quoted a Supreme Court decision in Maruti Suzuki Ltd v. Commissioner of Central Excise, Delhi-III, clarifying that inputs used in any activity contributing to the final product would comply with the definition of 'input' in the CENVAT Credit Rules, 2004.

Moreover, the Tribunal referred to the judgment in V. Ramakrishna Rao v. Commissioner of Central Excise, Hyderabad, which highlighted that denial of credit could result from establishing that the research and development facility was not integral to the manufacturing process. In the absence of any allegation that research and development did not contribute to the manufacturing process, the disallowance of CENVAT credit was set aside. The Tribunal, respecting the precedent set by previous decisions, allowed the appeal and set aside the impugned order, pronouncing the judgment in open court on 04/11/2024.