Cenvat credit on repair inputs denied, as repair is not manufacture; penalty reduced for excessiveness.

Cenvat credit was held inadmissible on inputs used exclusively to repair goods returned after clearance on payment of duty, because repair activity does not amount to manufacture and credit under the Cenvat scheme is confined to inputs used in manufacture of excisable goods. The denial of input credit was therefore sustained. On penalty, the tribunal considered the amount excessive in the facts and circumstances and reduced it, while maintaining the credit disallowance. The decision restates that repair work, by itself, does not qualify as manufacture for Cenvat credit purposes.

---

---

Issues: (i) Whether Cenvat credit was admissible on inputs used only for repair of goods cleared on payment of duty; (ii) whether the penalty imposed required reduction.

Issue (i): Whether Cenvat credit was admissible on inputs used only for repair of goods cleared on payment of duty.

Analysis: The admitted position was that the goods were received back only for repair and that the inputs on which credit had been taken were used for such repair work. Credit under the Cenvat scheme is available only for inputs used in the manufacture of excisable goods. Repair activity does not amount to manufacture.

Conclusion: Cenvat credit was not admissible on inputs used exclusively for repair purposes and the denial of credit was upheld.

Issue (ii): Whether the penalty imposed required reduction.

Analysis: Having regard to the facts and circumstances, the penalty was considered excessive even though the denial of credit was maintained.

Conclusion: The penalty was reduced to Rs. one lakh.

Final Conclusion: The denial of input credit was sustained, but the penalty was reduced.

Ratio Decidendi: Cenvat credit is available only for inputs used in manufacture and not for inputs used solely for repair work, as repair does not constitute manufacture.

---