In a setback to Crompton Greaves Ltd, the Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the transformers constitute ‘inputs’ in terms of rule 2(k) of the Cenvat Credit Rules (CCR), 2004.
M/s Crompton Greaves Ltd, the appellant in these two appeals, is a manufacturer of ‘transformers’, which are either cleared domestically or exported upon removal in terms of rule 19(3) of Central Excise Rules, 2001 read with notification no. 41/2001-CE (NT) dated 26th June 2021, and the duties of central excise attendant to ‘parts and components’ procured by them were availed as credit under Cenvat Credit Rules, 2004. It also happened that some of these exported ‘transformers’ had been returned to them for carrying out repairs which may have involved utilization of such inputs.
It would appear that the appellant-Commissioner was inclined to discard applicability of circular no. 283/117/96-CX dated 31st December 1996 of Central Board of Excise & Customs (CBEC) clarifying that ‘inputs’ used in such repairs be deemed to have been cleared ‘as such’ and hence eligible for credit. The appeal against disallowance of request for restoration of credit came to be rejected by order of Commissioner of Central Excise (Appeals), Mumbai – II leading to the present appeal.
A Two-Member Bench of the Tribunal comprising CJ Mathew, Technical Member and Ajay Sharma, Judicial Member observed that “It would appear that the objection of the central excise authorities is to the deployment of the impugned goods not for manufacture but for repair and which was neither within the ambit of rule 2(k) of CENVAT Credit Rules, 2004 nor cleared ‘as such’ within flexibility afforded by rule 4 of CENVAT Credit Rules, 2004. Nonetheless, the repair executed by the appellant, even if not manufactured, would be tantamount to service and to the extent that the impugned goods had been deployed in rendering of ‘taxable service’ or service that had exported, eligibility for availment of CENVAT credit cannot be denied. Accordingly, there is no merit in the appeal of Revenue which is dismissed.”
“The impugned goods constitute ‘inputs’ in terms of rule 2(k) of CENVAT Credit Rules, 2004, rejection of claim for restoration of credit is not tenable. Accordingly, the applications are restored to the original authority for disposal in terms of section 11B of Central Excise Act, 1944” the Bench concluded.
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