2011 (5) TMI 437 - AT - Central Excise

Cenvat Credit - welding electrodes, DA gas/oxygen gas/acetylene gas used for fabrication and installation of capital goods and repair & maintenance of capital goods are eligible for Cenvat Credit or not - Held that - material eligible for Cenvat Credit, order set aside. The appeal allowed.(Rajasthan High Court in the case Hindustan Zinc Ltd. - 2008 -TMI - 30617 - HIGH COURT RAJASTHAN)

Summary

Issues:
Whether welding electrodes and gases used for fabrication and installation of capital goods and repair & maintenance of capital goods are eligible for Cenvat Credit.

Analysis:
The case involved a dispute regarding the eligibility of welding electrodes and gases for Cenvat Credit. The original adjudicating authority had ruled against the appellant, imposing a Cenvat Credit demand, interest, and a penalty. The Commissioner (Appeals) upheld this decision. However, the Tribunal, in its final order, held that Modvat Credit would only be admissible for welding electrodes used for fabrication of capital goods, not for repair & maintenance of plant & machinery. The case was remanded back to the original authority for further clarification on the usage of the goods. Subsequently, the Assistant Commissioner confirmed the duty demand, which was appealed to the Commissioner (Appeals). The Commissioner (Appeals) upheld the Modvat credit demand but set aside the penalty. The appellant challenged the denial of Modvat credit for welding electrodes used in repair & maintenance, while the department appealed against the setting aside of the penalty.

The appellant's counsel argued that the issue had been decided in their favor by judgments of various High Courts, including the Rajasthan High Court and Chhattisgarh High Court, which held that welding electrodes and gases used for repair & maintenance of plant & machinery are eligible for Cenvat Credit. They also contended that since the Cenvat Credit had been correctly taken, there should be no penalty imposed. On the other hand, the Departmental Representative defended the impugned order, stating that items used for repair & maintenance cannot be considered as goods in or in relation to the manufacture of the final product.

After considering the submissions and legal precedents, the Tribunal found in favor of the appellant. Citing judgments of the Rajasthan High Court and Chhattisgarh High Court, the Tribunal concluded that the Commissioner (Appeals)'s order denying Cenvat Credit for welding electrodes and gases used in repair & maintenance of plant & machinery was not sustainable. Therefore, the impugned order was set aside, and the appeal of the appellant was allowed.