2013 (5) TMI 264 - AT - Central Excise

Eligibility for cenvat credit - whether the welding electrodes and H.R. Plates used for repair and maintenance of the plant and machinery are eligible for cenvat credit - Held that - As decided in Ambuja Cements (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN) and Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) welding electrodes other items used for repair and maintenance of plant and machinery would be eligible for cenvat credit. Also decided in Singh Alloys & Steel Ltd. case (1993 (1) TMI 97 - HIGH COURT AT CALCUTTA) that for determining the question as to whether an input is eligible for cenvat credit what is relevant is whether its use is commercially expedient and what ought to be used is not relevant. Since with defective machinery, leaking pipes and tubes and leaking tanks manufacturing operations are not commercially possible and regular repair and maintenance is an essential activity for smooth manufacturing operation, the inputs used for repair and maintenance of the plant and machinery would be eligible cenvat credit. In favour of assessee.

Summary

Issues:
- Eligibility of welding electrodes for cenvat credit
- Eligibility of H.R. Plates for cenvat credit

Eligibility of Welding Electrodes for Cenvat Credit:
The dispute in the appeals revolved around whether welding electrodes and H.R. Plates used for plant and machinery repair and maintenance are eligible for cenvat credit. The Commissioner (Appeals) disallowed cenvat credit for welding electrodes but allowed it for H.R. Plates. The Revenue appealed against the allowance of credit for H.R. Plates, while the appellant challenged the denial of credit for welding electrodes. The Revenue contended that the impugned order was incorrect, citing precedents like Jaypee Rewa and SAIL cases. The appellant argued that precedents like Ambuja Cements and Hindustan Zinc cases supported their position that inputs used for repair and maintenance are essential for manufacturing operations and thus eligible for cenvat credit.

Analysis - Welding Electrodes:
The Tribunal considered various judgments, including one by the Hon'ble A.P. High Court, which held that welding electrodes for repair and maintenance are not eligible for cenvat credit. However, other High Courts like Chhattisgarh, Rajasthan, and Karnataka took a different stance, allowing cenvat credit for items used in repair and maintenance. The Tribunal emphasized that the distinction between repair and maintenance activities and manufacturing is irrelevant for determining cenvat credit eligibility. The crucial factor is whether the item's use is commercially feasible for manufacturing operations. Citing the Calcutta High Court's decision, the Tribunal reiterated that inputs essential for smooth manufacturing operations, including those used for repair and maintenance, should be eligible for cenvat credit. Consequently, the Tribunal dismissed the Revenue's appeal against allowing cenvat credit for welding electrodes.

Eligibility of H.R. Plates for Cenvat Credit:
Regarding H.R. Plates, the Tribunal noted the arguments presented by both sides. The Revenue contested the allowance of cenvat credit for H.R. Plates used in repair and maintenance activities, relying on previous judgments. In contrast, the appellant cited judgments supporting the eligibility of such inputs for cenvat credit, emphasizing their importance in ensuring smooth manufacturing operations. After considering the submissions and precedents, the Tribunal concluded that inputs used for repair and maintenance, including H.R. Plates, are crucial for uninterrupted manufacturing processes. Therefore, the Tribunal allowed the appeal filed by M/s U.P. State Sugar & Cane Development Corporation, permitting cenvat credit for H.R. Plates.

In conclusion, the Tribunal dismissed the Revenue's appeal while allowing the appellant's appeal, affirming the eligibility of both welding electrodes and H.R. Plates for cenvat credit when used for repair and maintenance of plant and machinery.