2010 (5) TMI 594 - AT - Central Excise

Admissibility of Cenvat credit in respect of C.I. Castings and Welding Electrodes- Commissioner (Appeals) upheld the denial of Cenvat credit only in respect of Steel Castings and Welding Electrodes - Appellant contended that sugar plant being very old, some of the machineries were to be replaced and the steel castings had been used as component of the sugar mill machinery - Welding Electrodes are used with the welding machine which being classifiable under Chapter 85 are capital goods and hence the Welding Electrodes being part of such machine would be covered by the definition of capital goods - Held that plea of the appellant has to be considered for which this matter would have to be remanded to the original Adjudicating Authority - As regards the welding electrodes, while the Tribunal s in its decision in the case of Vikram Cement 2009 -TMI - 75108 - CESTAT, NEW DELHI - held that welding electrodes used for repair and maintenance of the plant and machinery are not eligible for Cenvat credit as input however if welding electrodes are used as part of the welding machine falling under Chapter 85 of the tariff, the same would be eligible - Matter remanded to to the original Adjudicating Authority.

Summary

Issues:
Admissibility of Cenvat credit in respect of C.I. Castings and Welding Electrodes.

Analysis:
The case involved a sugar mill that had taken Cenvat credit on various items used for making parts of the sugar mill machinery and repairs during a specific period. A show cause notice was issued for the recovery of wrongly taken Cenvat credit, disallowing credit on certain items. The Additional Commissioner disallowed a portion of the credit, which was upheld by the Commissioner (Appeals) in part. The dispute in the present appeal was narrowed down to the admissibility of Cenvat credit for C.I. Castings and Welding Electrodes only.

The appellant argued that the C.I. Castings were used to manufacture components of the sugar mill machinery that needed replacement. They provided details of the parts made from C.I. Castings during the appeal. Regarding Welding Electrodes, the appellant claimed they were used for manufacturing capital goods and for repair and maintenance. They contended that since Welding Electrodes were used with welding machines classified as capital goods, they should be eligible for Cenvat credit. The appellant cited a Tribunal decision supporting their argument.

On the other hand, the Departmental Representative defended the impugned order, referring to a different Tribunal decision that Welding Electrodes used for repair and maintenance were not eligible for Cenvat credit. They also disagreed with the Commissioner (Appeals)'s decision to allow credit on certain items based on a Tribunal judgment.

After hearing both sides and reviewing the records, the judge determined that the dispute centered on the admissibility of Cenvat credit for C.I. Castings and Welding Electrodes. The judge found merit in the appellant's arguments regarding the usage of C.I. Castings and Welding Electrodes in manufacturing and repair processes but concluded that further examination was necessary. Therefore, the judge set aside the impugned order and remanded the matter to the original Adjudicating Authority for a fresh determination on the eligibility of C.I. Castings and Welding Electrodes for Cenvat credit, considering the observations made during the proceedings.