Capital goods cannot be treated as inputs for Cenvat credit merely because they are used in relation to manufacture.

Plastic crates and bins used for material handling in a factory were held ineligible for input duty credit under the Cenvat Credit Rules, 2002 because goods conventionally understood as capital goods cannot be treated as inputs merely by being used in relation to manufacture. The definition of "input" was read in contrast with capital goods, and items not wholly or substantially consumed in production were excluded from input credit. The alternative claim for input duty credit was also noted to have been raised for the first time before the Tribunal.

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Issues: Whether plastic crates and bins used for material handling in the factory were eligible for input duty credit under Rule 2 of the Cenvat Credit Rules, 2002.

Analysis: The definition of "input" was examined in the context of the Cenvat scheme and the distinction between inputs and capital goods. Plastic crates used as material handling equipment were found to be goods conventionally understood as capital goods, not items which are wholly or substantially used up in the manufacture of final products. The earlier reliance on the expression "in the manufacture of goods" was held insufficient to extend input credit to such capital goods. The alternative plea for input duty credit was also noted to have been raised for the first time before the Tribunal.

Conclusion: Plastic crates and bins were not eligible for input duty credit; the finding in favour of the assessee was set aside and the Revenue's appeal was allowed.

Ratio Decidendi: Goods conventionally falling within the category of capital goods cannot be treated as inputs for Cenvat credit merely because they are used in relation to manufacture.

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