Expansive definition of inputs allows Cenvat credit on factory-use items not qualifying as capital goods.

Cenvat credit was available on asbestos jointing sheets, welding electrodes and similar items used in the factory for manufacture of excisable goods, even though they were not accepted as capital goods. The inclusive definition of "inputs" in Rule 2(g) was construed expansively, and items used in or in relation to the manufacturing process were treated as eligible for credit. On that basis, the credit disallowance was held unsustainable, and the assessee was found entitled to credit with consequential relief.

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Issues: Whether Cenvat credit on asbestos jointing sheets, welding electrodes and similar items used in the factory for manufacture of excisable goods was admissible as inputs or capital goods under the Cenvat Credit Rules, 2004.

Analysis: The items in question were not accepted as capital goods under the relevant capital goods definition. The deciding consideration was whether they could nevertheless fall within the ambit of inputs under the inclusive definition in Rule 2(g). Relying on the legal position that the expression "include" in a statutory definition enlarges the scope of the defined term, the items used in the manufacturing process were treated as eligible inputs for credit purposes.

Conclusion: The credit was admissible as inputs, and the disallowance was unsustainable.

Final Conclusion: The assessee was held entitled to Cenvat credit on the disputed items used in the factory for manufacture of excisable goods, and the adverse order was set aside with consequential relief.

Ratio Decidendi: An inclusive definition of "inputs" must be construed expansively, and items used in the factory in relation to manufacture may qualify for credit even if they are not capital goods.

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