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2023 (6) TMI 143 - PUNJAB AND HARYANA HIGH COURTCENVAT Credit - capital goods or not - GP coils, GP sheets, aluminum sections used in making air ducts for humidification machinery - Rule 2 (a) of CCR, 2004 - HELD THAT:- In the instant case, the GP sheets etc. are required for proper functioning of air humidifiers machine which ultimately supports the working of machinery and plant etc. of the appellant Company used in manufacture of cotton yarn and, therefore, they are integral part of the machinery as well as capital goods, as these ducts hold the air humidifier machine in position which ultimately helps in proper manufacturing of final product. It is not the case of the revenue that these items were not required to be used for making ducts. They might not be falling under Rule 2 (a) (A) (i) of the Rules, 2004 but they certainly fall under Rule 2 (a) (A) (iii) of the Rules, 2004 and can also be treated as spares and accessories of the capital goods i.e. humidifier machine. The GP sheets and GP coils etc. used as ducts for the humidifier machine also fall within the definition of ‘inputs’ as given in Rule 2 (k) of the Rules, 2004 which says that input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Learned counsel for the revenue had vehemently argued that this explanation was no more available to the appellant in view of amendment dated 07.07.2009 in Explanation 2 of Rule 2 (k). As per this amendment, the inputs only include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer but does not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. On applying the user test also, the case of the appellant can be stated to be squarely covered with the ratio of law as laid down in the above cited authorities. As such, there cannot be any hesitation to hold that the GP coils, GP sheets or aluminum sections which were used for preparing air ducts for the humidifier machine installed in the factory premises of the appellant were not only inputs but could also be treated as components or accessories of the humidifier machine and as falling within the definition of Rule 2 (a) (A) (iii) of the Rules, 2004 and were entitled to cenvat credit. The Tribunal was not justified in rejecting the claim of the appellant for availing cenvat credit in respect of aforementioned GP sheets and coils etc. by treating them as capital goods and as a consequence thereof, the revenue was also not entitled to claim any interest or impose any penalty on the amount of cenvat credit as taken on GP coils, GP sheets and aluminum sections etc. Appeal allowed - the issue answered in favour of the appellant assessee and against the revenue.
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