Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)
Departmental Instruction
F.No.267/11/2010-CX8
New Delhi, dated the 8th 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.
- 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.
- 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.
- Receipt of this instruction may kindly be acknowledged.
Yours faithfully,
(Amish Kumar Gupta)
OSD (CX-8)