Input credit on steel items used in capital goods repairs may qualify under Rule 2(k), supporting waiver of pre-deposit.

Steel items used for repairs or replacement of worn-out parts of capital goods were treated as capable of falling within the inclusive scope of input credit under the Explanation to Rule 2(k) of the Cenvat Credit Rules, 2004. The alternative plea was accepted on a prima facie basis because replacement steel items may become part of capital goods, unlike welding electrodes used only for repairs. On that view, waiver of pre-deposit and stay of recovery were granted, and limitation was not separately examined.

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Issues: Whether waiver of pre-deposit and stay of recovery should be granted where the disputed Cenvat credit on steel items was claimed, in the alternative, as admissible input credit under Rule 2(k) of the Cenvat Credit Rules, 2004.

Analysis: The application proceeded on the footing that the steel items were used for repairs or replacement of worn out parts of capital goods, though the adjudicating authority had treated them as items used for fabrication or manufacture of capital goods. The alternative plea under Rule 2(k) was entertained as a prima facie contention. On the facts placed, the steel items, if used in the manufacture of capital goods or for replacement of parts forming part of capital goods, could fall within the inclusive scope of inputs under the Explanation to Rule 2(k). The cited precedent on welding electrodes used for repairs was treated as distinguishable because such items do not become part of the capital goods, whereas replacement steel items may become part of them. In this prima facie view, limitation did not require separate discussion.

Conclusion: Waiver of pre-deposit and stay of recovery were granted in favour of the appellant.

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