2009 (6) TMI 591 - AT - Central Excise

Waiver of pre-deposit - Penalty - welding electrodes used for repairs and maintenance of plant and machinery - eligibility for Cenvat credit - as inputs as well as capital goods - use for lining of the jute bag and this is packing material and which is covered by definition of inputs - Held that - eligibility of capital goods namely steel wire rope, chain and spares of cane carrier and spare of Boiler for Cenvat credit - all of them are parts of capital goods - steel wire rope is part of cane unloader and other spares are part of the cane carrier and insulating materials are part of boiler - pre-deposit of Cenvat credit demand along with interest and penalty is waived - stay petition is allowed

Summary

Issues:
1. Waiver of pre-deposit of Cenvat credit demand upheld by Commissioner (Appeals).
2. Denial of Cenvat credit for welding electrodes, D.P. Liner, and processing chemicals.
3. Denial of capital goods credit for steel wire rod and other items.

Analysis:
1. The appellant sought a waiver of the requirement of pre-deposit of Cenvat credit demand of Rs. 3,86,288/- along with interest and penalty, upheld by the Commissioner (Appeals). The Cenvat credit amounting to Rs. 2,41,488/- for welding electrodes, D.P. Liner, and processing chemicals was denied, as well as the capital goods credit amounting to Rs. 1,44,800/- for steel wire rod and other items. The appellant argued that the items in question were essential for the manufacture of sugar, thus eligible for Cenvat credit. The Department defended the denial of credit.

2. The appellant contended that the welding electrodes were used for repair and maintenance of sugar mill machinery, citing a judgment by the Rajasthan High Court. They argued that D.P. Liner, Ranocide, Drimax, and Magna Flock were all integral to the sugar manufacturing process. The appellant asserted that these items qualified as inputs or capital goods under the relevant definitions. The Department, however, maintained its position that the Cenvat credit had been rightly denied and opposed the waiver of the pre-deposit requirement.

3. Upon careful consideration, the Tribunal found merit in the appellant's arguments. Referring to the Rajasthan High Court judgment, the Tribunal agreed that welding electrodes for repair and maintenance were eligible for Cenvat credit. It also acknowledged the essential role of D.P. Liner, Ranocide, Drimax, and Magna Flock in the sugar manufacturing process. Similarly, the Tribunal deemed the disputed capital goods, such as steel wire rope and boiler spares, as integral components for the production process. Therefore, the Tribunal concluded that there was a prima facie strong case in favor of the appellant. Consequently, the pre-deposit of Cenvat credit demand, interest, and penalty were waived for the appeal hearing, with recovery stayed until the appeal's disposal or a period of six months from the order's issuance, whichever came earlier. The stay petition was allowed.