Cenvat credit on repair materials used for capital goods in factory falls within Rule 2(b) coverage

Rule 2(b) of the Cenvat Credit Rules, 2002 treats specified tariff goods and their components, spares and accessories used in the factory as capital goods, and also covers items used for repairs of capital goods within the factory. On that approach, steel sheets and coal used for repairing capital goods and parts thereof were regarded as eligible for Cenvat credit. The analysis also notes that, where the tribunal's view does not raise a substantial question of law, interference under Section 35G of the Central Excise Act, 1944 is not warranted.

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Issues: Whether goods such as steel sheets and coal used within the factory for repairs of capital goods and parts thereof qualify as "capital goods" or eligible components/accessories under Rule 2(b) of the Cenvat Credit Rules, 2002 so as to entitle the assessee to Cenvat credit, and whether any substantial question of law arose under Section 35G of the Central Excise Act, 1944.

Analysis: Rule 2(b) defined "capital goods" to include specified tariff goods, their components, spares and accessories, and moulds and dies used in the factory of the manufacturer, while excluding office equipment or appliances. The goods in question were admittedly used in the factory for repairs of capital goods. The distinction between goods used by the manufacturer in its factory and goods used in the manufacture of the final product was treated as material. On that basis, the Court found that the items fell within the scope of the rule and that the appellate tribunal's view did not give rise to any substantial question of law warranting interference under Section 35G.

Conclusion: Cenvat credit was held admissible on the goods used for repairs of capital goods in the factory, and the Revenue's challenge was rejected.

Ratio Decidendi: Goods used in the factory as components, spares, accessories, or for repairs of capital goods fall within Rule 2(b) of the Cenvat Credit Rules, 2002 and are eligible for Cenvat credit; absent a substantial question of law, interference under Section 35G is not warranted.

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