2013 (8) TMI 98 - AT - Central Excise

Welding electrodes used for repair and maintenance of plant and machinery, are eligible for Cenvat Credit or not 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 Also, Apex Court in case of Grasim Industries Ltd. reported in 2011 (10) TMI 2 - SUPREME COURT OF INDIA has held that repair & maintenance of machinery is not manufacture and therefore steal scrap, arising in course of the said activity is not excisable, this judgment does not help the Department, as for determining the eligibility for Cenvat Credit of an item used in an activity, what is relevant is as to whether without that activity in which the item, in question, is used, manufacturing operation are commercially feasible, and it is not relevant as to whether that activity by itself amounts manufacturer. In the case of Sree Rayalaseema Hi-Strength Hypo Ltd. reported in 2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT decided by Hon ble Andhra Pradesh High Court, the point as to whether without regular repair & maintenance of the plant and machinery by using welding electrodes, manufacturing operations, were commercially feasible, had not been considered Decided in favor of Assessee.

Summary

Issues:
1. Eligibility of welding electrodes for Cenvat Credit during Nov. 2004 to Sept. 2005 period.

Analysis:
The case involved a dispute regarding the eligibility of welding electrodes used for repair and maintenance of plant and machinery for Cenvat Credit during a specific period. The Jurisdictional Assistant Commissioner denied the Cenvat Credit, leading to a demand of &8377; 72,434/- along with interest and a penalty of &8377; 10,000/- on the manufacturer of sugar and molasses. The Commissioner (Appeals) upheld the denial, prompting an appeal to the Tribunal.

The appellant argued that welding electrodes were essential for the smooth manufacturing operation, citing precedents from various High Courts supporting the eligibility of such items for Cenvat Credit. On the other hand, the departmental representative defended the denial by referring to a Tribunal case and a High Court judgment, emphasizing that repair and maintenance activities are distinct from manufacturing, as held by the Apex Court in previous cases.

The Tribunal analyzed the definition of "input" under the Cenvat Credit Rules, emphasizing the broad scope of goods used directly or indirectly in relation to the manufacture of final products. Referring to a Supreme Court judgment, the Tribunal concluded that activities integral to manufacturing, such as repair and maintenance, should be considered as activities in relation to manufacture. The Tribunal also highlighted High Court judgments supporting the eligibility of welding electrodes for Cenvat Credit in similar contexts.

In light of the above discussion and the precedents cited, the Tribunal held that the impugned order denying Cenvat Credit on welding electrodes used for repair and maintenance of plant and machinery was not sustainable. Consequently, the Tribunal set aside the order and allowed the appeal in favor of the appellant.