2013 (7) TMI 2 - AT - Central Excise

Tribunal expands cenvat credit eligibility for plant maintenance items, aligning with manufacturing processes

KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW

The Tribunal allowed cenvat credit for items used in the repair and maintenance of plant and machinery, overturning the Department's disallowance and ... Cenvat credit denied - PMP Plates, Hot Strip, Mill Plates, MS Plates, HR Plates, H.R. Sheet & angles used in relation to repair & maintenance of plant and machinery - Held that:- Repair and maintenance of plant and machinery is an activity without which smooth manufacturing is not possible. Commercially, manufacturing activity is not possible with malfunctioning machines, and leaking tanks, pipes and tubes. Therefore the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat credit. For eligibility of an input for Cenvat credit what is relevant is whether the activity in which that input is used has nexus with the manufacture of final product and the nexus has to be determined on the basis of criteria as to whether that activity is commercially essential for manufacture of the final products. In favour of assessee. Issues:Eligibility for cenvat credit of items used for repair & maintenance of plant and machinery.Analysis:The case involves the eligibility of cenvat credit for items used in the repair and maintenance of plant and machinery. The Department disallowed the credit, leading to two separate adjudication orders confirming demands and imposing penalties. The Commissioner (Appeals) upheld the orders, prompting appeals from the Appellant. The issue hinges on whether items like PMP Plates, Hot Strip, Mill Plates, MS Plates, HR Plates, H.R. Sheet & angles qualify as inputs or capital goods for cenvat credit.The Appellant argued citing judgments from various High Courts, including Rajasthan, Chhattisgarh, and Karnataka, establishing the eligibility of such items for cenvat credit based on their use in repair and maintenance activities. The Departmental Representative, however, relied on a contrary judgment from the High Court of Andhra Pradesh, contending that repair and maintenance activities are distinct from manufacturing, thus precluding cenvat credit eligibility for related items.The Tribunal examined the precedents and legal principles. It highlighted that the High Courts of Rajasthan, Chhattisgarh, and Karnataka had ruled in favor of allowing cenvat credit for items used in repair and maintenance activities. The Tribunal emphasized the broad definition of 'inputs' encompassing goods with a nexus to the manufacture of final products. It referenced the judgment of the Calcutta High Court and the Supreme Court's interpretation to support the view that items facilitating essential activities like repair and maintenance qualify for cenvat credit.The Tribunal concluded that the repair and maintenance of plant and machinery are integral to manufacturing processes, making items used in these activities eligible for cenvat credit. It overturned the impugned order, setting aside the penalties and allowing the appeal in favor of the Appellant. The judgment underscores the commercial necessity and nexus between activities supporting manufacturing processes and the eligibility for cenvat credit, aligning with the broader interpretation of 'inputs' under the Cenvat Credit Rules.