2013 (7) TMI 788 - AT - Central Excise

Cenvat Credit on Welding electrodes used for repair and maintenance of plant and machinery Held that - Relying upon the judgment of Hon ble Chhattisgarh High Court in case of Ambuja Cement Eastern Ltd. 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT , it has been held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - Hon ble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in 2010 (4) TMI 424 - KARNATAKA HIGH COURT has also held that the goods used for repair & maintenance of plant and machinery are eligible for Cenvat Credit Decided in favor of Assessee.

Summary

Issues:
- Eligibility of welding electrodes for Cenvat Credit for repair and maintenance of plant and machinery.

Analysis:
1. The appellant, a manufacturer of sugar and molasses, disputed the denial of Cenvat Credit on welding electrodes used for repair and maintenance of plant and machinery during a specific period. The Assistant Commissioner denied the credit, imposed a demand with interest and penalty, which was upheld by the Commissioner (Appeals) with a reduced penalty.

2. The appellant's counsel argued that regular repair and maintenance activities are crucial for smooth manufacturing operations, citing judgments from various High Courts supporting the eligibility of welding electrodes for Cenvat Credit in similar cases.

3. The departmental representative defended the denial of credit by referring to a Tribunal case and High Court judgments stating that welding electrodes for repair and maintenance are not eligible for Cenvat Credit. The representative also highlighted the Apex Court's stance on repair and maintenance activities not constituting manufacturing, thus not qualifying for credit.

4. The judge considered both arguments and reviewed the records, acknowledging the importance of repair and maintenance in manufacturing operations. The judge analyzed the definition of input under the Cenvat Credit Rules and emphasized the broader scope of "used in or in relation to manufacture" as interpreted by the Apex Court in previous cases.

5. The judge further elaborated on the interpretation of the term "used in relation to manufacture" and emphasized that activities like repair and maintenance, though not manufacturing per se, are essential for manufacturing operations. The judge referred to High Court judgments supporting the eligibility of welding electrodes for Cenvat Credit in similar contexts.

6. Despite the Apex Court's ruling on repair and maintenance not constituting manufacturing, the judge emphasized the commercial feasibility aspect in determining Cenvat Credit eligibility. The judge highlighted the lack of consideration in a specific High Court case regarding the feasibility of manufacturing operations without repair and maintenance using welding electrodes.

7. Considering the precedents and judgments from multiple High Courts supporting the eligibility of welding electrodes for Cenvat Credit in repair and maintenance activities, the judge concluded that the impugned order was not sustainable and set it aside, allowing the appeal in favor of the appellant.