Admissibility of credit on items used in the manufacture of Capital goods and parts thereof.

PJ/Case Laws/2011-12/1190

Case: Commr. Of C. Ex. & Cus, Vishakhapatnam-I versus Rashtria Ispat Nigam Ltd.

Citation: 2011 (267) E.L.T. 311 (A.P.)

Issue:- Admissibility of credit on items used in the manufacture of Capital goods and parts thereof.

Brief Facts:- The Assistant Commissioner disallowed Cenvat credit to the respondent-assessee in respect of steel sheets and coal used within the factory for fabrication of capital goods and parts thereon. In appeal, the Commissioner (Appeal) found that the items were used in the manufacture of capital goods and parts thereof and held them eligible for Cenvat Credit.

In appeal by Revenue, the Tribunal following the ruling given in India Sugars and Refineries Ltd. Versus CCE, Bangalore [2006 (205) E.L.T. 717 (Tri.)] in which the judgment of P & H High Court in CCE, Chandigarh–II versus National Fertilizers Ltd [2002 (140) E.L.T. 372 (P & H)] and the judgment of the Tribunal in Jaypee Rewa Plant versus CCE, Raipur [(2003) 56 RLT 152 (LB)] was referred, held that the Revenue’s appeals was liable to be rejected. The Tribunal noted that the Commissioner (A) had gone into great detail and had applied the provisions of the Rule 2 of the Cenvat Credit Rules, 2004 and of Board’s Circular No. 31/90–CS8, dated 31.05.1990.

Hence, Revenue is in appeal before the High Court.

Appellant’s Contentions:- Revenue contended that the Tribunal had misconstrued Rule 2 of the CCR, 2004 and the Explanation thereof. It was submitted that in the light of the findings of the Original Authority that the goods in question were used for repairs of machinery, they did not fall within the scope of the “Capital goods”, as such, no Cenvat credit could be claimed upon it.

Reasoning of Judgment:- The High Court held that the definition of Capital Goods include not only goods falling under Chapter 82, 84, 85 and 90 of the CETA but also components, spares, and accessories of such goods, and moulds and dies which are used in the factory of the manufacturer of the final product, but not equipment and appliances used in an office. It is not even the case of the Revenue that the goods, for which the Cenvat credit was claimed, are equipment or appliances used in the office. It is their case that it is only if the goods are used in the manufacture of the final product, or are goods other than those used for repairs of capital goods, would they fall under the definition of the ‘Capital goods’. The distinction between the manufacturer of the final product and manufacture of final product must not be lost sight of. It is the goods that fall under the definition of the ‘Capital goods’ and used in the manufacturer’s factory.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1190

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