Cenvat credit on replacement parts for machinery repair was allowed, treating worn-component materials as capital goods.

Aluminium sheets used to replace worn-out boiler parts in repair and maintenance were treated as part of the machinery and therefore as capital goods for Cenvat credit purposes. On that basis, materials used to restore machinery through replacement of worn components were held eligible for credit, supported by earlier decisions on plates used for machinery repair. The denial of Cenvat credit was therefore incorrect, and credit was held admissible to the assessee.

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Issues: Whether aluminium sheets used for replacing worn out parts of a boiler in repair and maintenance are eligible for Cenvat credit as capital goods.

Analysis: The aluminium sheets were used for repair and maintenance of the boiler, as evidenced by the certificate on record. Materials used to replace worn out parts of machinery are to be treated as part of the machinery itself and, therefore, as capital goods for Cenvat credit purposes. The conclusion was reinforced by the view taken in prior decisions holding that plates used for repair and maintenance of machinery are eligible for credit as capital goods.

Conclusion: The denial of Cenvat credit on aluminium sheets was held to be incorrect, and credit was held admissible in favour of the assessee.

Ratio Decidendi: Goods used to replace worn out parts of machinery for repair and maintenance are to be treated as part of the machinery and qualify as capital goods for Cenvat credit.

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