2016 (1) TMI 1187 - AT - Central Excise

Cement and clinker - irregular availment of CENVAT credit on welding electrodes used for repair of pre-heater kiln crusher and cilos and other machinery - Held that - reliance placed on the decision of the case of Kisan Cooperative Sugar Factory Ltd Vs CCE. Meerut 1 2013 (8) TMI 98 - CESTAT NEW DELHI where it was held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - CENVAT credit allowed - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues involved: Denial of credit of welding electrodes for repair and maintenance of machinery as capital goods for availing Cenvat credit.

Detailed Analysis:

1. Issue of Denial of Credit: The appellant was denied credit on welding electrodes used for repair and maintenance of machinery by the department. The original authority confirmed the demand, interest, and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the present appeal.

2. Contention of the Department: The department contended that welding electrodes are not eligible for credit as capital goods, citing the judgment in SAIL Vs CCE Ranchi case where it was held that welding electrodes used for repair and maintenance of machinery were not admissible for credit. The department argued that since the Supreme Court dismissed the SLP filed by SAIL, the credit on welding electrodes should not be allowed.

3. Appellant's Argument: The appellant, represented by Shri R.Muralidhar, relied on judgments in cases like Kisan Cooperative Sugar Factory Ltd Vs CCE Meerut and West Coast Paper Mills Ltd Vs CCEST Mangalore, where credit on welding electrodes was allowed as capital goods. The appellant also referred to their own case where the Commissioner (Appeals) had allowed credit on welding electrodes for a subsequent period.

4. Analysis of Tribunal's Judgments: The Tribunal analyzed various judgments, including the SAIL case, and observed that for determining the eligibility of Cenvat credit on an item used in an activity, the crucial factor is whether without that activity, manufacturing operations are commercially feasible. The Tribunal highlighted that the activity itself need not amount to manufacturing, as long as it contributes to the feasibility of manufacturing operations. The Tribunal also emphasized that multiple high courts had held that welding electrodes used for repair and maintenance of machinery are eligible for Cenvat credit.

5. Decision and Conclusion: Following the precedent set in the Kisan Co-operative Sugar Factory Ltd case, the Tribunal held that credit on welding electrodes for repair and maintenance of machinery is admissible as capital goods. Therefore, the impugned order denying the credit was deemed unsustainable, and the appeal was allowed with consequential reliefs.

6. Final Verdict: The Tribunal set aside the impugned order and allowed the appeal, granting the appellant the right to avail the Cenvat credit on welding electrodes used for repair and maintenance of machinery as capital goods.