Case Law Details
Items used in the manufacture of capital goods and parts thereof and are eligible for CENVAT credit under Rule 2 of the CENVAT Credit Rules, 2002.
CCE Vs. Rashtriya Ispat Nigam Ltd. (AP High Court)- ‘Capital goods’ would not only include goods falling under Chapters 82, 84, 85 and 90 of the Central Excise Tariff Act but also components, spares and accessories of such goods, and moulds and dies which are used in the factory of the manufacturer of the final product, but not equipment or appliance used in an office.
It is not even the case of the Revenue that the goods, for which CENVAT credit was claimed, are equipment or appliances used in the office. It is their case that it is only if the goods are used in the manufacture of the final product, or are goods other than those used for repairs of capital goods, would they fall within the definition of “capital goods” under Rule 2(b) of the CENVAT Credit Rules. The distinction between manufacturer of the final product, and the manufacture of the final product, must not be lost sight of. It is only goods mentioned in clauses (i) to (iii) of Rule 2(b), and which are used in the manufacturer’s factory, which fall within the ambit of “capital goods”. The goods in question are, admittedly, used in the repairs of capital goods in the factory of the manufacturer and, as such, fall within the ambit of Section 2(b)(ii) of the CENVAT Credit Rules.
IN THE HIGH COURT OF AHDHRA PRADESH
CENTRAL EXCISE APPEAL No. 36 of 2011
The Commissioner of Central Excise and Customs, Visakhapatnam – I Commissioner-ate, Port Area, Visakhapatnam. – Appellant
Vs
M/s. Rashtriya Ispat Nigam Ltd., (Visakhapatnam Steel Plant Ltd.,)
represented by its Managing Director, Visakhapatnam – Respondent
Coram: Mr. Justice V.V.S.RAO and Mr. Justice RAMESH RANGANATHAN
Date of Judgement: March 01, 2011
J U D G M E N T
(Per Justice Ramesh Ranganathan)
1.This appeal, under Section 35G of the Central Excise Act, 1944, is preferred against final order No.1314 of 2007 dated 16.11.2007 of the Customs, Excise and Service Tax Appellate Tribunal, Bangalore (CESTAT) which arose out of the order in appeal No.E/806/2005, dated 24.3.2005 passed by the Commissioner of Customs & Central Excise (Appeals), Visakhapatnam. The Assistant Commissioner, by his order in original, disallowed CENVAT credit in respect of steel sheets and coal used within the factory for fabrication of capital goods and parts thereon. In appeal the Commissioner found that the items were used in the manufacture of capital goods and parts thereof and, as such, were eligible for CENVAT credit under Rule 2 of the CENVAT Credit Rules, 2002. In the appeal preferred by the Revenue, the CESTAT, following its ruling in India Sugars and Refineries Ltd v CCE, Balgalore (2006) 74 RLT 61 in which they had referred to the judgment of the Punjab & Haryana High Court in CCE, Chandigarh-II v National Fertilizers Ltd(2002) 79 ECC 758 and the judgment of the Tribunal in Jaypee Rwea Plant v CCE, Raipur(2003) 56 RLT 152 (LB), held that the Revenue’s appeals were liable to be rejected. The CESTAT noted that, the Commissioner (Appeals) had gone into great detail, and had applied the provisions of the Explanation 2 to Rule 2 of the CENVAT Credit Rules and the Board’s Circular No.31/90-CS8 dated 31.5.1990.
2. Before us, Mr.A.Rajasekhar Reddy, learned Senior Standing Counsel for Central Excise and Customs would submit that the CESTAT had misconstrued Rule 2 of CENVAT Rules and the Explanation thereof; and, in the light of the findings of the original authority that the goods in question were used for repairs of machinery, they did not fall within the ambit of “capital goods” under Rule 2 of the CENVAT Rules and, as such, no CENVAT credit could be claimed thereupon.
Rule 2(b) of the CENVAT Rules has been extracted in the appellate order of the Commissioner (Appeals) dated 24.3.2005, and it reads as under.
Rule 2(b) “capital goods” means,–
(i) all goods falling under Chapter82, Chapter 84, Chapter 85, Chapter 90, heading No.68.02 and sub-heading No.6801.10 of the First Schedule to the Tariff Act;
(ii) components, spares and accessories of the goods specified at (i) above;
(iii) moulds and dies;
used in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office.
3. It is evident therefrom that “capital goods” would not only include goods falling under Chapters 82, 84, 85 and 90 of the Central Excise Tariff Act but also components, spares and accessories of such goods, and moulds and dies which are used in the factory of the manufacturer of the final product, but not equipment or appliance used in an office. It is not even the case of the Revenue that the goods, for which CENVAT credit was claimed, are equipment or appliances used in the office. It is their case that it is only if the goods are used in the manufacture of the final product, or are goods other than those used for repairs of capital goods, would they fall within the definition of “capital goods” under Rule 2(b) of the CENVAT Credit Rules. The distinction between manufacturer of the final product, and the manufacture of the final product, must not be lost sight of. It is only goods mentioned in clauses (i) to (iii) of Rule 2(b), and which are used in the manufacturer’s factory, which fall within the ambit of “capital goods”. The goods in question are, admittedly, used in the repairs of capital goods in the factory of the manufacturer and, as such, fall within the ambit of Section 2(b)(ii) of the CENVAT Credit Rules. The order of the CESTAT, in rejecting the contention of the Revenue, though cryptic does not give rise to any substantial question of law necessitating interference in proceedings under Section 35G of the Act.
4. The central excise appeal is, accordingly, dismissed. No costs.
major heading of capital goods have credit taken 50%