2009 (3) TMI 807 - AT - Central Excise

Cenvat/Modvat credit - Inputs/Capital goods - Oxygen - Nitrogen - Welding Electrodes - Held that - a manufacturer is entitled to Cenvat credit in respect of inputs or capital goods received in the factory of manufacture of final products used directly or indirectly in relation to manufacture of final products or any other purpose within the factory of production. The definition is very wide to cover even maintenance and repair. The issue of Cenvat credit on Welding Electrodes, Oxygen and Acetylene gas used for maintenance was the subject matter of the appeal in the case of India Sugars and Refineries Ltd. v. CCE, Bangalore 2005 (11) TMI 161 - CESTAT, BANGALORE wherein this Tribunal had examined the issue in depth and came to the conclusion that all the impugned items are entitled for Cenvat credit. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Entitlement to Cenvat credit on Oxygen, Nitrogen, and Welding Electrodes under Rule 2 of CENVAT Credit Rules, 2004.

Analysis:
The appeal addressed the issue of whether the respondents, as manufacturers of Cement and Clinker, were entitled to Cenvat credit on Oxygen, Nitrogen, and Welding Electrodes. The Revenue contended that these items did not qualify as 'inputs' as per Rule 2 of the CENVAT Credit Rules, 2004, and could not be considered as capital goods. The Commissioner (Appeals) allowed the credit based on various precedents, including J.K. Cement Works and Hindustan Zinc Limited cases, which supported the eligibility of the impugned items for Cenvat credit.

The Revenue challenged the decision on the grounds that the subject goods were not used in or in relation to the manufacture of final products directly or indirectly, thus not meeting the definition of 'inputs.' Furthermore, the Revenue argued that Oxygen, Nitrogen, and Welding Electrodes did not fall under the categories of 'capital goods' as specified in Rule 2 of the CENVAT Credit Rules, 2004, making them ineligible for credit.

The Tribunal considered the definitions of 'inputs' and 'capital goods' under the CENVAT Credit Rules, 2004. It noted that the definition of 'inputs' encompassed all goods used in or in relation to the manufacture of final products, directly or indirectly. The Tribunal also highlighted the broad interpretation of 'capital goods,' including components, spare parts, and accessories used for production or processing of goods. Based on these definitions and previous case laws, the Tribunal concluded that the impugned items were eligible for Cenvat credit, as they were used for maintenance of machinery, plant, and equipment.

The Tribunal emphasized the liberal language of the explanation regarding 'capital goods,' which covered a wide range of items used in the manufacturing process. It further clarified that the impugned goods, though falling under different chapters, qualified as components under the definition of 'capital goods' and were thus eligible for credit. The Tribunal also cited previous decisions, such as India Sugars and Refineries Ltd., Mangalore Refinery & Petrochem. Ltd., and Rashthya Ispat Nigam Ltd., which supported the eligibility of Welding Electrodes, Oxygen, and Nitrogen for Cenvat credit.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) based on the broad interpretation of 'inputs' and 'capital goods' under the CENVAT Credit Rules, 2004, along with the precedents cited. The Tribunal dismissed the Revenue's appeal, affirming the entitlement of the respondents to Cenvat credit on Oxygen, Nitrogen, and Welding Electrodes used for maintenance purposes.