Cenvat credit on capital goods sent for repair within 180 days must be preserved; refund denial was unsustainable.

Rule 4(5)(a) of the Cenvat Credit Rules, 2002 applies when capital goods are sent for repair and received back within 180 days. In that situation, the credit position remains protected and reversal on the footing of removal as such is not warranted. On the facts, the filter stacks had been sent for repairs and returned within the prescribed period, so denial of the refund claim was inconsistent with the scheme of the rule. The impugned orders were set aside and the refund claim was directed to be allowed with consequential benefit.

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Issues: Whether Rule 4(5)(a) of the Cenvat Credit Rules, 2002 applied to capital goods sent for repair and received back within 180 days, so as to entitle the assessee to retain or re-credit the CENVAT amount and obtain refund of the amount reversed.

Analysis: Rule 4(5)(a) permits CENVAT credit where inputs or capital goods are sent to a job worker for further processing, testing, repair, reconditioning or any other purpose and are received back within 180 days. The dispute record showed that the filter stacks were sent for repairs and returned within the prescribed period. In that situation, the requirement to reverse credit under Rule 3(4) was not attracted in the manner assumed by the lower authorities, and the denial of the refund claim was contrary to the scheme of Rule 4(5)(a).

Conclusion: The assessee was entitled to invoke Rule 4(5)(a), and the rejection of the refund claim could not be sustained. The impugned orders were set aside and the matter was remanded with a direction to allow the refund claim with consequential benefit.

Ratio Decidendi: Where capital goods are sent for repair and are received back within 180 days, Rule 4(5)(a) of the Cenvat Credit Rules, 2002 governs the credit position and reversal on the footing of removal as such is not justified.

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