2013 (11) TMI 943 - AT - Central Excise

Eligibility for cenvat credit - Welding Electrodes used for repair and maintenance Input or not - Held that - Following AMBUJA CEMENTS EASTERN LTD. Versus COMMISSIONER OF C. EX., RAIPUR 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT - Welding electrodes used for repair and maintenance of the plant and machinery are eligible for cenvat credit - cenvat credit demand is not sustainable and there is no merit in the Revenue s appeal for imposition of penalty Decided against the Revenue.

Summary

Issues:
Eligibility of welding electrodes for cenvat credit in repair and maintenance activities.

Analysis:
The judgment revolves around the eligibility of welding electrodes for cenvat credit in repair and maintenance activities. The appellant, a sugar manufacturer, faced a dispute with the Department regarding the cenvat credit on Welding Electrodes used for plant and machinery repair. The Asstt. Commissioner confirmed the cenvat credit demand, leading to an appeal to the Commissioner (Appeals) who upheld the demand but set aside the penalty. The main contention was whether welding electrodes used for repair and maintenance activities are eligible for cenvat credit.

The appellant argued that various High Court judgments, including those of Chhattisgarh, Karnataka, and Rajasthan, supported their stance that welding electrodes used in repair and maintenance activities are eligible for cenvat credit. They highlighted that the dismissal of SLP without reasons does not establish a binding precedent. On the other hand, the Departmental Representative cited a judgment from the Andhra Pradesh High Court to argue against the eligibility of cenvat credit for welding electrodes in repair and maintenance activities.

The judge, after considering the submissions and records, analyzed the conflicting judgments of different High Courts. Despite the Andhra Pradesh High Court's contrary view, the judge relied on the consistent stance of the Chattisgarh, Karnataka, and Rajasthan High Courts, emphasizing that welding electrodes used in repair and maintenance activities are indeed eligible for cenvat credit. The judge clarified that the nexus between the activity and manufacturing process determines eligibility for cenvat credit, regardless of whether the activity is directly part of manufacturing. Consequently, the impugned order upholding the cenvat credit demand was deemed unsustainable, leading to the allowance of the appellant's appeal and the dismissal of the Revenue's appeal.

In conclusion, the judgment resolved the issue by establishing the eligibility of welding electrodes for cenvat credit in repair and maintenance activities, based on the nexus with the manufacturing process, and upheld the appellant's appeal while dismissing the Revenue's appeal.