Definition of “Input” Rule 2(k) of Cenvat Credit rules covers all the Goods directly or indirectly related to the final products: Madras HC [Read Judgment]

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The Madras High Court in a recent decision, observed that the term “input” defined under Rule 2(k) of the Cenvat Credit Rules, 2004 covers all goods which is directly and indirectly related to the manufacture of the final products. Such goods are eligible for Cenvat Credit as per the Rules.

Coming to the facts of the case, the appellants are engaged in manufacture of sugar, falling under Chapter Heading No.1701 of the Central Excise Tariff Act, 1985. In consequent to a search conducted in the business premises of the appellants, the Adjudicating Authority also proposed to disallow Cenvat credit, on asbestos sheets, used by the appellant for roofing purposes by observing that the said items was used by the assessee only for repair and maintenance purposes and hence not covered by the definition of ‘inputs’, as contemplated by Rule 2(k) of Cenvat Credit Rules, 2004.

On appeal, the Commissioner of Central Excise (appeals) confirmed the disallowance made by the assessee. Being aggrieved, the appellants approached the CESTAT. However, the appeal was dismissed. Therefore, the appellant preferred an appeal before the High Court challenging that the impugned orders.

Earlier, the Madras High Court in Commissioner of Central Excise, Trichyvs. CESTAT, Chennai reported in 2014 (309) E.L.T. 71 (Mad.),it was held that the items such as MS Plates various sizes, Oxygen Gas, Acetylene Gas, MS welding electrodes, Aluminium Welding wire and CI Welding wire are eligible for credit.

The Court observed that “the term ‘inputs’, is wide enough to cover all the goods, except the goods specifically mentioned in the definition, inputs used in or in relation to the manufacture of the final product, whether directly or indirectly or whether it contained the final products or not”. The Court also relied upon the judicial decisions cited on behalf of the appellant, held that welding electrodes used for repair and maintenance of machineries, in relation to manufacture of the final product, namely sugar, is eligible for Cenvat credit.

Read the full text of the Judgment below.