Tyres for material handling equipment are not ‘Capital Goods’, No Cenvat Credit: CESTAT [Read Order]

The Delhi bench of the CESTAT, recently held that tyres used for material handling equipment are not ‘Capital Goods’ for the purse of the Central excise law for which, cenvat credit cannot be granted.

Appellants-assessee, M/s Hindustan Zinc Limited, engaged in manufacture of zinc & lead concentrates, uses mining machinery/ material handling equipment in relation to excavation and transportation of ores, located within the same captive mining area. For the purpose of its manufacturing activity, appellants purchased tyres for use in the material handling equipments and claimed cenvat credit on the duty paid on such tyres.

However, the department denied the claim by finding that the tyres for material handling equipment falling under Central Excise Tariff 4011 99 00 are outside the ambit of the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules. Simultaneously, penalty was imposed on the appellant-assessee.

Before the Tribunal, the assessee claimed that such vehicles are used in the mines attached to the factory. Also, the tyres are used in the mining machinery and are eligible for cenvat credit as inputs if not capital goods. They further argued that cenvat credit on dumpers have been allowed under Cenvat Credit Rules, 2004 consistently by the Tribunal.  According to them, the tyres, in the instant case are also of the same nature and therefore, cenvat credit should be allowed.

The Tribunal bench, after hearing both the sides, observed that “the definition of inputs in Rule 2(k) of the Cenvat Credit Rules covers all goods used in the factory by the manufacturer of the final product, but excludes the capital goods and motor vehicles, among other things. The tyres are parts of the transport vehicle and cannot be considered as inputs.”

After perusing case laws, the bench noted that the cenvat credit for dumpers/dippers were allowed since these are used in the mining activity for movement of ore and other things in the captive mines.

“Upon perusal of the technical data sheet of the vehicle ‘Normet RBO’ we are lead to the conclusion that these vehicles are not meant to be used for movement of materials in the mines. Consequently, we are of the view that such goods cannot be covered under capital goods since they are in the nature of motor vehicle other than dumper and dipper. Consequently, tyres of such vehicle can also not be allowed for availing cenvat credit.”