Cenvat Credit on Repair & Maintenance

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14497 Points)
Replied 19 December 2009

All input rawmaterial cenvat credit abailable in RG23A part -II

Other than raw material all Input cenvat abailable as capital goods RG23Cpart-II.50% in current year 50% next year. Like spare parts, capital goods, tools & Die. itc.

1 Like

Navneet Gupta (Article) (129 Points)
Replied 19 December 2009

I thnk cenvat is nt available since the goods are not uesd in or in relation to manufacture but for repairs of CG.

Reetika Goel (Qualified Chartered Accountant) (565 Points)
Replied 20 December 2009

The definition of Capital Goods as given u/rule 2(a) of CCR' 2004 is exhaustive definition. It provide for all goods falling under Chapter 84,85, 90 & heading No. 68.04 & 68.05.

Third item in this definition provide for all the spares, equipments & accessories for the above items.

This definition make it clear that all the equipments required either for Capital Goods or for their repair will be classified under Capital Goods and CENVAT shall be available.

Secondly, the definition nowhere provide for use of capital goods in the production of goods & services, it simply says for use of goods in the factory of production whether or not used in actual production.

On this ground as well, CENVAT shall be available.

Girish R. Kulkarni (student) (34 Points)
Replied 21 December 2009

What if goods removed to depot under Excise Invoice and brought back againto the factory for Sale from factory gate also tell me where i will gate information about EPCG that I have asked.

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 24 December 2009

Cenvat credit on spares used in maintenance of machinery is an eligible CG or input. Credit Available.

For returned/ rejected good resold Rule 16 could be followed where the credit wouldbe availed on the returned goods as if supplied ( based on self invoice) and the same could be reversed on resale.

CS P K Pandey (employed) (97 Points)
Replied 03 March 2011

if spares are sold as scrap, wheather excise duty is payble. if yes, as per rule 3(5A) of CCR? Some one told me excise duty is not payble on spares when sold as scrap. Please repaly asap.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 03 March 2011

Originally posted by : CS P K Pandey
	if spares are sold as scrap, wheather excise duty is payble. if yes, as per rule 3(5A) of CCR? Some one told me excise duty is not payble on spares when sold as scrap. Please repaly asap.

f cenvat credit is availed on capital goods, then scrap from capital goods is dutiable. otherwise not

Tilak Singh V (Partner) (22 Points)
Replied 18 August 2011

Please go through the following clarification issued by the Ministry of Finance. According to this circular, credit is not admissible.

Departmental Instruction

F.No.267/11/2010-CX8

Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)

New Delhi, dated the 8^th July, 2010.

To,

All Director Generals,

All Chief Commissioners of Central Excise (including LTU),

All Commissioners of Central Excise (including LTU).

Sir/ Madam,

Subject: Availability of cenvat credit on inputs used in the manufacture of capital goods-reg.

I am directed to invite your attention to the landmark judgement of the CESTAT Larger Bench in the case of Vandana Global Ltd. V/s CCE, Raipur [2010-TIOL-624-CESTAT-DEL-LB] delivered on 30.04.10, on admissibility of credit on capital goods and inputs and to state that the Tribunal has ruled that ‘capital goods’ defined in the CENVAT Credit Rules, in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of settled decisions of Supreme Court on the issue. The Tribunal has further ruled that goods like cement and steel items used for laying ‘foundation’ and for building ‘supporting structures’ cannot be treated as either inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules. It has also been stated by Tribunal that amendment to Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004 inserted vide Notification No. 16/2009-CE (NT) dated 07.07.09, is clarificatory in nature and has retrospective effect.

2. Attention is also drawn to the Tribunal’s judgement in the case of Vikram Cement V/s CCE, Indore [2009(242)ELT545(Tri-Del)], where the Tribunal held that credit on welding electrodes used for repair and maintenance, is not available as input. It may also be noted that in the case of Vikram Cements V/s CCE, Indore [2005(187)ELT145(SC)], it has been conclusively held by the Apex Court that the definition of capital goods is not inclusive and only the items covered under the definition and used in the factory of the manufacturer can be treated as capital goods.

3. It thus follows from the above judgements that credit on capital goods is available only on items, which are excisable goods covered under the definition of ‘capital goods’ under CENVAT Credit Rules, 2004 and used in the factory of the manufacturer. As regards ‘inputs’, they have to be covered under the definition of ‘input’ under the CENVAT Credit Rules, 2004 and used in or integrally connected with the process of actual manufacture of the final product for admissibility of cenvat credit. The credit on inputs used in the manufacture of capital goods, which are further used in the factory of the manufacturer is also available, except for items like cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. Further, credit shall also not be admissible on inputs used for repair and maintenance of capital goods.

4. In view of above stated position, necessary action may be taken to safeguard revenue immediately. Pending cases on the issue may also be taken up immediately for finalisation.

5. Receipt of this instruction may kindly be acknowledged.

Yours faithfully,

(Amish Kumar Gupta)

OSD (CX-8)

Tilak Singh V (Partner) (22 Points)
Replied 18 August 2011

According to the followilg instruction from the Ministry of Finance, credit is not admissible:

Departmental Instruction

F.No.267/11/2010-CX8

Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)

New Delhi, dated the 8^th July, 2010.

To,

All Director Generals,

All Chief Commissioners of Central Excise (including LTU),

All Commissioners of Central Excise (including LTU).

Sir/ Madam,

Subject: Availability of cenvat credit on inputs used in the manufacture of capital goods-reg.

I am directed to invite your attention to the landmark judgement of the CESTAT Larger Bench in the case of Vandana Global Ltd. V/s CCE, Raipur [2010-TIOL-624-CESTAT-DEL-LB] delivered on 30.04.10, on admissibility of credit on capital goods and inputs and to state that the Tribunal has ruled that ‘capital goods’ defined in the CENVAT Credit Rules, in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of settled decisions of Supreme Court on the issue. The Tribunal has further ruled that goods like cement and steel items used for laying ‘foundation’ and for building ‘supporting structures’ cannot be treated as either inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules. It has also been stated by Tribunal that amendment to Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004 inserted vide Notification No. 16/2009-CE (NT) dated 07.07.09, is clarificatory in nature and has retrospective effect.

2. Attention is also drawn to the Tribunal’s judgement in the case of Vikram Cement V/s CCE, Indore [2009(242)ELT545(Tri-Del)], where the Tribunal held that credit on welding electrodes used for repair and maintenance, is not available as input. It may also be noted that in the case of Vikram Cements V/s CCE, Indore [2005(187)ELT145(SC)], it has been conclusively held by the Apex Court that the definition of capital goods is not inclusive and only the items covered under the definition and used in the factory of the manufacturer can be treated as capital goods.

3. It thus follows from the above judgements that credit on capital goods is available only on items, which are excisable goods covered under the definition of ‘capital goods’ under CENVAT Credit Rules, 2004 and used in the factory of the manufacturer. As regards ‘inputs’, they have to be covered under the definition of ‘input’ under the CENVAT Credit Rules, 2004 and used in or integrally connected with the process of actual manufacture of the final product for admissibility of cenvat credit. The credit on inputs used in the manufacture of capital goods, which are further used in the factory of the manufacturer is also available, except for items like cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. Further, credit shall also not be admissible on inputs used for repair and maintenance of capital goods.

4. In view of above stated position, necessary action may be taken to safeguard revenue immediately. Pending cases on the issue may also be taken up immediately for finalisation.

5. Receipt of this instruction may kindly be acknowledged.

Yours faithfully,

(Amish Kumar Gupta)

OSD (CX-8)