2018 (7) TMI 421 - AT - Central Excise

R&D Section Eligible for Cenvat Credit within Factory Premises

Hero MotoCorp Limited Versus C.C.E., Delhi-III

The Tribunal allowed the appeal, setting aside the denial of Cenvat Credit on capital goods used in the appellant's Research & Development section ... CENVAT Credit - capital goods installed in the factory of the appellant and used in the R&D section - Held that:- The issue has came up before this Tribunal in the case of Maruti Suzuki India Ltd. vs. CCE, Delhi-III [2016 (9) TMI 627 - CESTAT CHANDIGARH], where it was held that there is no bar in using the capital goods in the buildings earmarked for R&D activities as long as it is situated within the factory premises registered with the Central Excise Department. The facts are not in dispute that these capital goods are installed in the factory premises of the appellant and used in Research & Development section for testing and development - CENVAT Credit allowed - appeal allowed - decided in favor of appellant. Issues:Appeal against denial of Cenvat Credit on capital goods used in R&D section.Analysis:The appellant appealed against the denial of Cenvat Credit on capital goods used in their factory's Research & Development section. The Tribunal referred to a previous case involving Maruti Suzuki India Ltd. vs. CCE, Delhi-III, where the definition of capital goods under Rule 2 of the Cenvat Credit Rules, 2004 was discussed. The definition includes various goods falling under specific chapters and categories. It was emphasized that for goods to qualify as capital goods, they must be used in the factory of the manufacturer of the final product. The Tribunal clarified that the location within the factory premises is crucial, not necessarily the direct relation to the manufacturing process. The Tribunal cited previous judgments to support the interpretation that capital goods used in R&D facilities within the factory premises are eligible for Cenvat Credit.The Tribunal found that the appellant's R&D facility was within the factory premises registered with the Central Excise Department, even though it was in separate buildings. Considering the definition of capital goods and previous rulings, the Tribunal concluded that there was no impediment to using capital goods in R&D buildings within the factory premises. The Tribunal referenced the decision in the case of USV Limited and other judgments to support the eligibility of capital goods used in R&D activities. Consequently, the Tribunal held that the demand for reversal of Cenvat credit was not sustainable and allowed the appeal, setting aside the impugned order.In light of the settled issue and the undisputed facts regarding the installation and use of capital goods in the Research & Development section within the factory premises, the Tribunal ruled in favor of the appellant. The Tribunal held that the appellant was entitled to avail the Cenvat Credit on the capital goods in question. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief.