Cenvat credit on consumable manufacturing items treated as inputs, not capital goods, where use was process-related and limited in life

Metal band saw blades and steel shots used in manufacturing rough forgings were treated as consumables used in or in relation to manufacture, not as capital goods, because they were used separately with the machinery, had a limited life, and functioned as process-related inputs. The broad definition of input under the Cenvat Credit Rules covered goods used directly or indirectly in manufacture. On the factual appreciation of their duration and manner of use, the finding that these items were inputs was reasonable, and the Cenvat credit taken on that basis was admissible.

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Issues: Whether metal band saw blades and steel shots used in the manufacture of rough forgings and forging articles were to be treated as inputs or capital goods for the purpose of Cenvat credit.

Analysis: The goods were used separately with the machinery and had a limited life, functioning as consumables in relation to the manufacturing process. The definition of input under the Cenvat Credit Rules was wide, covering goods used in or in relation to manufacture directly or indirectly, while the character of capital goods depended on their role in the manufacturing setup. On the factual finding regarding duration and nature of use, the view that these items were consumables used in relation to manufacture and hence inputs was held to be reasonable. No ground was shown to interfere with the factual appreciation made by the appellate authority.

Conclusion: The items were correctly treated as inputs and the credit taken at one time was admissible.

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