2017 (4) TMI 431 - AT - Central Excise

Eligibility of CENVAT Credit for Maintenance and Repair in Manufacturing

Bharat Heavy Electricals Ltd Versus Commissioner of Central Excise, Customs and Service Tax Hyderabad

The appeal addressed the eligibility of CENVAT credit on MS items used for repair and maintenance in the manufacturing of heavy engineering goods. The ... CENVAT credit - MS items like MS angles, channels, steel pipes etc., used for the purpose of repair - denial on the ground that items being used for non-manufacturing purposes - Held that: - identical issue has come up before the Tribunal in the case of Hindustan Zinc Vs. CCE, Jaipur [2013 (3) TMI 427 - CESTAT NEW DELHI], where it was held that the items used for repair and maintenance of plant and machinery would be eligible for Cenvat credit. The CENVAT credit is allowable only on such items used for maintenance and repair of plant and machinery. In the impugned order, such bifurcation has not been made by the lower authorities. Hence the impugned order set aside and matter remanded to the original adjudicating authority only, for the limited purpose to cause such bifurcation - appeal allowed by way of remand. Issues:1. Eligibility of CENVAT credit on MS items used for repair and maintenance.2. Bifurcation of items used for manufacturing and non-manufacturing activities.3. Remand for quantification of penalty.Analysis:1. The appeal dealt with the eligibility of CENVAT credit on MS items like angles, channels, and steel pipes used for repair and maintenance during the period 2002-03 to 2005-06. The appellant, engaged in manufacturing heavy engineering goods, availed CENVAT credit on these items, which was denied by the Department. The Tribunal referred to a similar case involving Hindustan Zinc where the High Court held that items used for repair and maintenance of machinery eligible for CENVAT credit. The Tribunal emphasized that CENVAT credit is allowable only on items used for maintenance and repair of plant and machinery, not for non-manufacturing activities. The impugned order was set aside, and the matter remanded for bifurcation of items used for eligible activities.2. The Tribunal noted that in the present case, some items were used for non-manufacturing activities like civil works, which are not eligible for CENVAT credit. The lower authorities failed to make a clear distinction between items used for manufacturing and non-manufacturing purposes. Therefore, the Tribunal remanded the matter to the original adjudicating authority for proper bifurcation. It was clarified that CENVAT credit can only be allowed on items used for repair and maintenance activities related to plant and machinery. The decision on penalty was deferred until after quantification based on the bifurcation.3. The Tribunal concluded by setting aside the impugned order and allowing the appeal by way of remand for proper quantification of penalty. The decision highlighted the importance of distinguishing between items used for manufacturing and non-manufacturing activities to determine the eligibility of CENVAT credit accurately. The judgment emphasized adherence to the principles established in previous cases regarding the eligibility of CENVAT credit on items used for repair and maintenance purposes, ensuring compliance with relevant legal provisions and precedents.