Cenvat credit on repair gases denied where oxygen and acetylene were used only for maintenance, not manufacture.

Oxygen and acetylene gases used only for repair, maintenance, restructuring and refurbishing of plant and machinery in a cement factory did not qualify as inputs for Cenvat credit under the Cenvat Credit Rules, 2002. The gases were not used in or in relation to manufacture of cement or clinker, and they were also not used to manufacture capital goods that were further used in the factory. A Larger Bench ruling on welding electrodes and gases used for repairs and maintenance was followed as binding precedent, so credit was correctly denied.

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Issues: Whether oxygen and acetylene gases used for repair, maintenance, restructuring and refurbishing of plant and machinery in the assessee's cement factory were eligible as inputs for Cenvat credit under the Cenvat Credit Rules, 2002.

Analysis: The gases were not used in or in relation to the manufacture of cement or clinker, but only for repairs and maintenance of plant and machinery. Explanation 2 to Rule 2(g) covers goods used in the manufacture of capital goods which are further used in the factory of manufacture, but the assessee did not manufacture any capital goods such as welding machines with the gases. The Larger Bench decision holding that welding electrodes and gases used for repairs and maintenance are not eligible inputs squarely applied, and judicial discipline required following that binding precedent rather than a contrary Division Bench view.

Conclusion: The gases were not eligible inputs and Cenvat credit was correctly denied.

Ratio Decidendi: Goods used only for repairs and maintenance of plant and machinery, and not in the manufacture of final products or of capital goods used in the factory, do not qualify as inputs for Cenvat credit.

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