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TMI Blog2018 (11) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Department was of the view that such credit is not eligible as inputs or capital goods used for R&D purposes does not fall within the definition provided in the CENVAT Credit Rules (CCR), 2004. 1.3 A Show Cause Notice was issued proposing to recover the Credit of Rs. 21,70,738/- along with interest and for imposing penalties. After due process of law, the Original Authority confirmed the demand, interest and imposed penalties. In appeal, the Commissioner (Appeals) upheld the same. Hence, this appeal. 2.1 On behalf of the appellant, Ld. Counsel Ms. S. Bharkavi submitted that the R&D Division is situated within the factory premises itself and that the capital goods as well as the inputs were used for activities relating to the process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he R&D Division are not used for manufacturing of finished products and therefore, are not eligible for Credit. 4. Heard both sides. 5. The case of the Department is that since the capital goods installed in the R&D Division are not used for manufacture of finished products, they are not eligible for Credit. Needless to say that the R&D Division is an integral part of the factory wherein the quality testing and other activities for improving the products takes place. It is usual that every manufacturing factory has a R&D Division wherein the Research and Development of the finished products as well as the process of manufacture is undertaken. This being the situation, I am of the view that the capital goods installed in the R&D Division a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the appellant is an integral part of the manufacture of final product. The case cited by the learned Advocate and the arguments of the learned DR both are of the view that if any input which is being used in or in relation to the manufacture of final product are entitled for CENVAT credit. In this case these tests are required to manufacture the final product. Accordingly, the appellants are entitled for CENVAT credit availed on such inputs which went for testing and analysis to manufacture the final product. The CENVAT credit on capital goods used in R & D section is also entitled as the same has been used in or in relation to the manufacture of the final product." 6.2 So also, this Tribunal in the case of M/s. Orchid Health Care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed/locally procured raw materials and capital goods installed and used in the R&D Centre as well as services rendered to R&D Centre cannot be said to be used in connection with the production or packing of goods for export. Consequently, it appears that the aforesaid goods are not eligible to be imported without payment of duty under Notification No. 52/2003-Cus., dated 31.03.2003 as well as goods procured locally without payment of duty under Notification No. 22/2003-CE dated 31.03.2003 and they are also not eligible vis-a-vis service tax input credit on the services rendered to R&D Centre." 5.2 The appellants have explained in detail how the R&D activities are linked to the process of manufacture. We find that after the R&D process the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced as under:- "5. The contention of the appellant is that the appellants are manufacturing vaccines and for the manufacture of vaccines, a regular research and development is required. In these circumstances, the some inputs which were received without payment of duty, which are required for the manufacture of export goods are consumed to carry out the research and development for the improvement of products. Without the research and development, the manufacturing process cannot be undertaken and completed properly. The appellants relied upon the decision of the Tribunal in the case of CCE, Hyderabad v. Dr. Reddy Laboratories Ltd. reported in 2010 (253) E.L.T. 316. The contention is that the Tribunal in a similar situation upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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