Whether the Cenvat credit of duty paid on lubricants used in the dumpers can be availed as an input?

PJ/CASE LAW/2016-17/3203

Case-NORTHERN COALFIELDS LTD. Versus COMMISSIONER OF C. EX. & S.T., BHOPAL

Citation-2016 (337) E.L.T. 289 (Tri. - Del.)

Brief Facts-The brief facts of the case are that the appellant is a producer of coal and is registered with the Central Excise Department. The appellant avails Cenvat credit of duties and taxes paid on inputs, capital goods and input services used in or in relation to production of coal. During the period March, 2011 to March, 2012, the appellant availed Cenvat credit of Central Excise duty paid on lubricants used in the dumpers, treating the same as inputs. Availment of Cenvat credit by the appellant on the said input item was objected to by the Internal Audit Wing of the Central Excise Department. Immediately the appellant reversed the Cenvat credit. Subsequently, the appellant filed the refund application, claiming refund of Central Excise Duty reversed on lubricants on the ground that Cenvat reversal pursuant to the audit objection was not proper, because there is no embargo in the definition of input for not extending the credit facility to lubricant. The refund application filed by the applicant was rejected by the authorities below. Hence, the present appeal before this Tribunal. Heard both the sides and perused the records.

Appelants Contention-The submissions of the appellant are that the dumpers have been used within the mining area in or in relation to production of coal. According to the appellant, the ‘input’ definition contained in Rule 2(k) of the Cenvat Credit Rules is extensive, which take within its ambit all goods (excepting the excluded goods) used in the factory by the manufacturer/producer for the purpose of taking Cenvat credit. He further submits since lubricant is not categorized as the excluded item in the definition of input, denial of Cenvat credit on the same is not proper.

Respondents Contention-The refund claim in the present case has been rejected on the sole ground that dumpers falling under Chapter 87 of the First Schedule to Central Excise Tariff Act, 1985 will only be considered as capital goods for the service providers providing taxable services with regard to specific category of services. According to the Department, since dumpers used by the manufacturer/producer of excisable goods are not specifically covered in the definition of capital goods, lubricants used in the said ineligible goods will not be entitled for Cenvat credit.

Reasoning Of Judgement-The tribunal find force in the submissions of the ld. Consultant for the appellant that the scope of input is very wide and the definition clearly provides all goods used in the factory of the manufacturer/producer shall be considered as ‘input’ for the purpose of taking Cenvat credit. They find that lubricant is not itemized in the excluded category of goods, i.e. it is not the item which has been specifically listed as non-cenvatable input in the definition of inputs. Therefore, tribunal is of the considered view that Central Excise duty paid by the appellant on the input i.e. lubricant will be eligible for Cenvat credit.
In view of above they do not find any merits in the impugned order, and thus, the same is set aside and the appeal is allowed in favour of the appellant, with consequential relief, if any, as per law.

Decision-Appeal allowed

Comment-The analogy of the case is that since the definition of inputs under Rule 2(k) of Cenvat Credit Rules, 2004, includes all goods used in factory by manufacturer. Rule 2(k) specifies certain items which will not be considered as an input for the purpose of availing the credit. It was held that since lubricants are not covered under excluded category of rule 2(k), credit of duty paid on such lubricants cannot be denied. Accordingly, the refund of erroneous reversal of credit was allowed.

Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3203

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