CCRs - Amended definition of 'input' w.e.f. 1.4.2011 - Will CBEC clarify?
A concerned Netizen raises this doubt:-
++ Executives dealing with Excise and Service Tax matters are still not able to digest the interpretation placed by C.B.E.C in extending the CENVAT benefit to Furniture and Stationery under the amended “input” definition, as clarified vide CBEC Circular No 943/04/2011-CX dated 29th April 2011.
++ While interpreting the amended “input” definition, the exclusion clauses provide for the following
(C) capital goods except when used as parts or components in the manufacture of a final product;
(F) any goods which have no relationship whatsoever with the manufacture of a final product.
++ If we accept the examples given for furniture and stationary used in an office within the factory as goods used in relation to the manufacturing business and hence the credit of the same is allowed, all other items which are either machinery nature and consumables like wheels for Hand Trolly (8716 9090), Light fittings (9405 9900), platform ladders (70072900), nuts and bolts (73181500), PVC bars for Cooling Towers (3916 1090), Personal protective Equipments (6116 9200), Argon Gas for emergency repairs in workshop (28042100) etc will become eligible as all these items have indirect nexus in relation to manufacturing in the factory. This is for the reason that clause (C) of exclusion clause will cover only those Capital goods defined under rule 2(a) of Cenvat Credit Rules 2004 for the purpose of these Rules.
Is it the intention of CBEC to expand the scope of items not appearing in the Capital goods definition to allow their credit as “input” ?
++ It may be noted that while clarifying the scope of budget provisions by TRU in their Circular No D.O.F.No. 334/3/2011-TRU dated 28th February 2011 it is clarified as under
Para 7.1 (a) The definition of “input” contained in rule 2(k) has been revised. The requirement that goods should be used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not has been removed. Henceforth, all goods used in the factory by the manufacturer of the final product, except those specified in the negative list and goods having no relationship whatsoever with the manufacture of final product, would qualify for treatment of inputs .”
If the amended “input” definition is read with the DO Letter and above referred CBEC Circular, then by this time assesses might have started availing Cenvat credit on Furniture, Stationery and many other items of similar in nature which were hitherto neither covered under Capital Goods definition nor Input definition.
++ It appears the example of Stationery and Furniture given in CBEC circular would have been classic example as to how these types of items do not have any “relationship of whatsoever with the manufacture of final product” for making them ineligible for Cenvat credit.
If the example of items like Furniture and Stationery given by CBEC are considered to be used in relation to manufacturing business, then there are host of other items which are more relevant in nature having relationship with the manufacturing business.
++ So far the scope of input is relating to the items which are not specified in the definition of Capital goods, but are in the nature of consumables in relation to production machinery, e.g. Lubricants, grease, coolants, etc. But still there are host of other items required to be used in the factory and in the workshop of factory which are in fact more relevant than Furniture and Stationery and are required to be used in relation with the manufacture but still not considered as eligible items for Cenvat credit.
Now in view of the above CBEC Clarification, one should start availing Cenvat on all of such items also under input route.
++ Although the requirement that goods should be used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not has been removed, if we read together the rule 2(k)(i) and exclusion clause (F) of the said rule 2(k) it reads as under
(i) all goods used in the factory by the manufacturer of the final product – but excludes, -- (F) any goods which have no relation whatsoever with the manufacture of a final product.
A combined reading of the relevant clauses of the definition of “inputs” the concept of “relationship” of input with the manufacture of final product still exists under amended definition.
++ In view of the above, it is not understood whether the examples of Furniture and Stationery given by CBEC is an error or it is the intention of the GOVT?. Will CBEC like to clarify the matter to avoid frivolous litigation?