Cenvat credit on honing stones allowed where they functioned as integral accessories to a honing machine in manufacture.

Honing stones used with a honing machine were treated as eligible for Cenvat credit as capital goods accessories because they performed an integral function in the manufacturing process. The Tribunal accepted that the honing machine was classifiable under sub-heading 8460 and used for smoothing and polishing ball bearings, and it relied on prior precedent equating honing stones with grinding wheels in functional effect. As the stones contributed directly to the finished quality of the product and were used as part of the capital goods setup, denial of credit was unsustainable. The assessee was entitled to relief and the order denying credit was set aside.

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Issues: Whether honing stones used in a honing machine were eligible for Cenvat credit as capital goods or accessories thereof.

Analysis: The Honing Machine was accepted as classifiable under sub-heading 8460 and was used for smoothing and polishing the outer surface of ball bearings. The decision turned on the functional role of the honing stones in the manufacture process. Relying on earlier Tribunal precedent treating honing stone as similar in function to a grinding wheel, the Tribunal held that the stones, being used with the honing machine and contributing to the finished quality of the product, fell within the relevant capital goods coverage.

Conclusion: The denial of Cenvat credit was unsustainable and the assessee was entitled to relief.

Final Conclusion: The appeal succeeded and the order denying credit was set aside, resulting in consequential relief to the assessee.

Ratio Decidendi: Goods used as integral accessories in the functioning of capital goods, where their use is directly linked to the manufacture process, may qualify for Cenvat credit under the relevant capital goods provision.

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