2013 (5) TMI 265 - 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. Moreover for permitting cenvat credit in respect of an item what is relevant is as to whether the use of that item has nexus with manufacture and not whether use of that item is part of the manufacture. Nexus has to be determined on the basis as to whether without use of that item manufacture is commercially feasible. Since repair & maintenance of plant and machinery is necessary for smooth manufacturing operation, the cenvat credit be eligible for credit would be admissible in respect of inputs used in repair and maintenance of plant and machinery. In favour of assessee

Summary

Issues:
1. Eligibility of cenvat credit on welding electrodes, M.S. Angles, Channels, H.R. Sheets for repair and maintenance of plant and machinery.

Analysis:
The case involved a dispute regarding the eligibility of cenvat credit on various items used for repair and maintenance of plant and machinery by a manufacturer of sugar chargeable to central excise duty. The department issued a show cause notice for recovery of allegedly wrongly taken cenvat credit amounting to Rs. 2,70,773/- for items like welding electrodes, M.S. Angles, Channels, H.R. Sheets, etc. The jurisdictional Assistant Commissioner denied the cenvat credit, but on appeal, the Commissioner (Appeals) allowed the appeal, stating that the items were used either in repair and maintenance or fabrication of machinery components. The Revenue filed an appeal against this decision, arguing that the items were used for supporting structures, not eligible for cenvat credit based on a Tribunal judgment. The respondent defended the decision, citing various judgments supporting the eligibility of items used in repair and maintenance. The Tribunal considered conflicting High Court judgments but ultimately held that cenvat credit is admissible for items used in repair and maintenance if they have a nexus with manufacturing operations. As repair and maintenance are essential for smooth manufacturing, cenvat credit for such inputs is permissible.

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals) decision to allow cenvat credit on the disputed items. The Tribunal's decision was based on the principle that the nexus between the items used for repair and maintenance and manufacturing operations determines their eligibility for cenvat credit, rather than whether the use is part of the manufacturing process. The Tribunal referenced judgments from different High Courts supporting the eligibility of items used in repair and maintenance, emphasizing the importance of such activities for uninterrupted manufacturing operations. Consequently, the Tribunal found no error in the Commissioner (Appeals) decision and upheld the admissibility of cenvat credit for the items in question, concluding the case by dismissing the Revenue's appeal and disposing of the cross-objection accordingly.