Tribunal allows CENVAT credit on duty paid for samples, penalty imposed overturned. The Tribunal allowed the appeal, setting aside the disallowance of CENVAT credit on duty paid for pumps, electric motors, and accessories received as ...
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Tribunal allows CENVAT credit on duty paid for samples, penalty imposed overturned.
The Tribunal allowed the appeal, setting aside the disallowance of CENVAT credit on duty paid for pumps, electric motors, and accessories received as samples by the assessee. The disputed period was from April 2006 to December 2007, and a penalty equal to the denied credit was imposed. The Tribunal interpreted Rule 2(a) of the CENVAT Credit Rules, 2004, and relied on precedents to support the admissibility of credit on research and development equipment not directly used in manufacturing. The assessee's contention was accepted, and the impugned order was overturned on 7.1.2011.
Issues: Disallowance of CENVAT credit on duty paid for pumps, electric motors, and accessories received as samples; Imposition of penalty equal to credit denied.
The judgment dealt with the disallowance of CENVAT credit amounting to Rs.2,07,636/- on duty paid for pumps, electric motors, and accessories received as samples by the assessee. The authorities contended that these goods were neither capital goods nor eligible inputs for credit. The disputed period was from April 2006 to December 2007, and a penalty equal to the denied credit was imposed. The assessee imported or purchased electric motors and pumps, dismantling them to understand the technology used by other manufacturers. The issue revolved around the interpretation of Rule 2(a) of the CENVAT Credit Rules, 2004, defining capital goods. The rule includes goods falling under Chapter 82, Chapter 84, and Chapter 85, used in the factory of the manufacturer of the final products. The Tribunal referred to precedents like Toyota Kirloskar Motor Ltd. Vs CCE Bangalore and CCE Meerut Vs India Glycols Ltd. to support the admissibility of credit on research and development equipment not directly used in manufacturing. Relying on these decisions, the Tribunal accepted the assessee's contention, setting aside the impugned order and allowing the appeal. The operative part of the order was pronounced on 7.1.2011.
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