2026 (3) TMI 349 - AT - Central Excise

Cenvat credit eligibility for steel used in fabrication and maintenance affirmed where spares are incorporated into manufacturing plant.

The note addresses whether steel items used by a maintenance workshop for fabrication of spares and for repair/upkeep of plant and machinery qualify as ... Eligibility for cenvat credit of inputs used in maintenance and repair of plant and machinery - interpretation of 'used in or in relation to manufacture' - chartered engineer certificate as verification - demand along with interest and an equivalent amount of penalty - Whether the steel item used by the appellant in their central engineering maintenance shop for use of maintenance and repair of plants and machineries, is entitled for cenvat credit or not ? Eligibility for cenvat credit of inputs used in maintenance and repair of plant and machinery - HELD THAT:- The Tribunal considered the appellant's documentary submissions, including departmental letters and a Chartered Engineer's certificate describing item-wise use of the goods as inputs for manufacture of spares and for repair and upkeep of existing plant and machinery. The Tribunal applied the binding decision of the Hon'ble Supreme Court in Kisan Co-operative Sugar Factory Ltd. [2023 (12) TMI 1303 - SUPREME COURT] which held that the expression 'used in or in relation to manufacture' has a wide meaning and includes items used for maintenance, repair, upkeep or fabrication of plant and machinery. Applying that principle, the Tribunal found that items used in the manufacture of spares and for maintenance and repair of machinery are integrally related to the manufacture of finished goods and thus qualify as inputs under Rule 2(k) of the Cenvat Credit Rules for the relevant period. The Tribunal concluded that the Commissioner erred in disallowing the cenvat credit and in ignoring the certified user-details furnished by the appellant. [Paras 6, 7, 8] Cenvat credit on the steel items used for manufacture of spares and for maintenance and repair of plant and machinery during June 2006 to March 2011 is admissible; the impugned demand and penalty are not sustainable on this ground. Final Conclusion: The appeal is allowed; the Tribunal upheld the appellant's entitlement to cenvat credit on the impugned items for the period June 2006 to March 2011 in view of the Supreme Court's ruling, with consequential reliefs. Issues: (i) Whether steel items (angles, channels, plates, bars etc.) used in the Central Engineering Maintenance Shop for fabrication of spares and for repair and maintenance of plant and machinery are eligible for cenvat credit under Rule 2(k) of the Cenvat Credit Rules, 2004 for the period June 2006 to March 2011.Analysis: The issue requires interpretation of the expression 'used in or in relation to manufacture' and the scope of 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004, including Explanation 2 to Rule 2(k) as in force during the relevant period. Documentary material furnished by the appellant included department-wise letters specifying items manufactured from the subject steel goods, the exact machinery/capital goods where those spares were used, and a Chartered Engineer's Certificate certifying verification of those details. The position laid down by the Hon'ble Supreme Court in Kisan Co-operative Sugar Factory Ltd. recognises a wide import to the phrase 'used in or in relation to manufacture' and expressly includes items used for maintenance, repair, upkeep or fabrication of plant and machinery within the ambit of admissible credit. Applying that legal framework to the verified factual material presented, the subject steel items were used to manufacture spares and parts incorporated into capital goods/plant and machinery employed in the manufacture of dutiable products, thereby satisfying the definition of 'input' under Rule 2(k) and Explanation 2 as applicable in the material period.Conclusion: The cenvat credit availed on the steel items used for fabrication of spares and for maintenance and repair of plant and machinery is admissible; the appeal is allowed in favour of the assessee and the impugned demand, interest and equal penalty confirmed by the adjudicating authority are set aside, with consequential relief, if any.