TMI Blog2016 (9) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs earmarked for R&D activities as long as it is situated within the factory premises registered with the Central Excise Department. The definition as it stands now does not make it mandatory that the capital goods should be used in or in relation to the manufacture of final products as was the case in some earlier periods. Therefore, the demand for reversal of cenvat credit is not sustainable inasmuch as it is allowable under the definition of capital goods under the Cenvat Credit Rules in view of the various decisions of Hon'ble Supreme Court, High Court and Tribunal. - Decided in favour of appellant - Excise Appeal Nos. 51748 -51749 of 2014 - Final Order No. A/60987-60988/2016-EX[DB] - Dated:- 19-7-2016 - Mr. Ashok Jindal, Member (J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2015 (Annexure A-3) allowed the appeal. The Tribunal while allowing the appeal of the respondent had dealt with the issue in Para 3 of the order. A perusal thereof shows that it does not satisfy the test of a reasoned and speaking order. Para 3 is quoted below :- The definition of capital goods as given in Rule 2(a) of the Cenvat Credit Rules, 2004 covers the goods listed in this sub-rule, which have been used in the factory of manufacture of final product. Thus, for capital goods Cenvat credit, their use in or in relation to manufacture of final product is not required and their use in the factory of manufacture for the purpose whether in or in relation to manufacture or for any other purpose including R D would be enough for permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 during which it was noticed that the appellant had availed cenvat credit in respect of capital goods used exclusively for R D purposes. The internal audit team found that the cenvat credit was taken duty paid on machines/ equipments/ apparatus installed in engineering Research Design and Development laboratory which was located in the buildings separately from the production area. These capital goods were used exclusively for R D for new model development, localisation of CKD parts, quality and warranty analysis and counter measures, and vehicle level testing purpose. Show cause notice dated 20.03.2013 was issued to the appellant for recovery of wrongly availed cenvat credit on capital goods to the tune of ₹ 9,97,38,882/- during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he R D activities, where the capital goods were installed, were in building separated from the production area, it cannot be said that the capital goods have been used in the factory of the manufacture of the final products. He further argued that the prototypes developed in the R D cannot be considered as the final product of the assessee and hence the cenvat credit was inadmissible. 6. We have very carefully considered all the point urged by both the sides. The definition of capital goods during the period of dispute, as per Rule 2 of the Cenvat Credit Rules, 2004 is given below: (a) capital goods means: (A) the following goods, namely:- (i) all goods falling under chapter 83, Chapter 84, Chapter 85, Chapter 90, heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory premises registered with the Central Excise Department. The definition as it stands now does not make it mandatory that the capital goods should be used in or in relation to the manufacture of final products as was the case in some earlier periods. 9. We find that the Tribunal had occasion to consider a similar issue with reference to the definition of capital goods under the erstwhile rule 57Q of the Modvat Rules in the case of USV Limited (supra) wherein it was held the capital goods installed in research laboratory situated in the appellant s factory premises are eligible for benefit of modvat credit even if not used in the factory of manufacture of finished goods. The Hon ble Supreme court has taken a similar view in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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