2013 (8) TMI 308 - AT - Central Excise

Court Allows Cenvat Credit for Repair and Maintenance Items

The appeal by M/s U.P. State Sugar Corporation challenged the denial of Cenvat Credit on M.S. Sheets and electrodes used for repairs and maintenance of ... Cenvat Credit/ Modvat Credit on M.S. Sheets and on electrodes - Appellant are engaged in manufacture of V.P. Sugar and Molasses falling under Central Excise Chapter Heading 17.01 and 17.03 of the Central Excise Tariff – Show cause notice issued on the ground that neither M.S.Sheets nor electrodes qualify for as capital goods/inputs under Rule 2(a) of the Cenvat Credit Rule – Held that:- Goods were used in repair and maintenance of the machinery in the factory – Further, relying on the judgment in the case of Ambuja Cements Eastern Ltd [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], Cenvat Credit is admissible if inputs are used in manufacture of parts and components of the capital goods and also in repairs and maintenance of the capital goods within the factory. Similar decision has been passed in the case of Hindustan Zinc Ltd.[2006 (5) TMI 44 - HIGH COURT RAJASTHAN] - Decided in favor of Assessee. Issues:1. Eligibility of Cenvat Credit on M.S. Sheets and electrodes used for repairs and maintenance of capital goods.2. Interpretation of Rule 2(a) of the Cenvat Credit Rule.3. Admissibility of Cenvat Credit based on precedents - Ambuja Cements Eastern Ltd. case and Union of India Vs Hindustan Zinc Ltd. case.Issue 1: Eligibility of Cenvat Credit on M.S. Sheets and electrodes for repairs and maintenance:The appeal was filed by M/s U.P. State Sugar Corporation challenging the denial of Cenvat Credit amounting to Rs. 58,617/- on M.S. Sheets and Rs. 44,324/- on electrodes used for repairs and maintenance of capital goods. The central issue was whether these items qualified as capital goods/inputs under Rule 2(a) of the Cenvat Credit Rule. The appellant argued that based on precedents like the Ambuja Cements Eastern Ltd. case and Union of India Vs Hindustan Zinc Ltd. case, Cenvat Credit should be allowed as these goods were used for repairs and maintenance within the factory of production.Issue 2: Interpretation of Rule 2(a) of the Cenvat Credit Rule:The Commissioner (Appeal) had rejected the appellant's claim stating that there was no evidence provided to prove that the goods were used in the manufacture of capital goods as claimed. However, the appellant contended that the M.S. Sheets and electrodes were indeed used for repairs and maintenance of machinery within their factory. The judgment highlighted the importance of Rule 2(a) and the requirement for goods to be used in the manufacture of parts and components of capital goods, as well as in repairs and maintenance within the factory premises.Issue 3: Admissibility of Cenvat Credit based on precedents:The judgment referenced the decisions in the Ambuja Cements Eastern Ltd. case and Union of India Vs Hindustan Zinc Ltd. case to support the eligibility of the appellant for Cenvat Credit. It was noted that the High Courts in these cases had ruled in favor of allowing Cenvat Credit for items used in repairs and maintenance of capital goods within the factory. The judgment emphasized that based on these precedents, the appellant was indeed eligible for Cenvat Credit on M.S. Sheets and electrodes used for repairs and maintenance, leading to the setting aside of the Order in Appeal and allowing the appeal.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the legal interpretation based on relevant precedents and rules.