2014 (2) TMI 548 - AT - Central Excise

Denial of CENVAT Credit - Whether the appellant is eligible for CENVAT credit of duty paid on MS plates, Angles, Sheets, and Channels etc - Original authority confirmed the demand and imposed penalty - Commissioner (Appeals) has allowed the benefit of CENVAT credit following decision in CCE, Coimbatore Vs. M/s. Jawahar Mills Ltd. 2001 (7) TMI 118 - SUPREME COURT OF INDIA - Held that - welding electrodes used for repair and maintenance are not eligible for CENVAT credit as the activity of repair and maintenance is distinct from manufacture, in my view when three High Courts as mentioned above held that the items used for repair and maintenance of plant and machinery are eligible for CENVAT credit it is this view which has to be adopted. Moreover, for permitting CENVAT credit what is relevant is as to whether the use of the item has nexus with manufacture and whether without that item manufacture is commercially possible. Since repair and maintenance is an activity which is essential for smooth manufacturing operations and without regular repair and maintenance, manufacturing activity is not commercially feasible, the inputs used for repair and maintenance of the plant would be eligible for CENVAT credit. I, therefore, hold that the impugned order disallowing the CENVAT credit is not sustainable - Following decision of Sree Rayalaseema Hi-Strength Hypo Ltd. v. CC & CE, Tirupati 2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT - Decided against Revenue.

Summary

Issues involved:
Whether the appellant is eligible for CENVAT credit of duty paid on MS plates, Angles, Sheets, and Channels etc.

Analysis:

1. The Commissioner (Appeals) allowed the benefit of CENVAT credit based on legal precedents, including the case of CCE, Coimbatore Vs. M/s. Jawahar Mills Ltd. and Rosa Sugar Works Vs. CCE, Kanpur. The Commissioner relied on the principle that goods need not be used in the manufacture of the final product but should be used in the factory of production. Additionally, the decision in Hindustan Zinc Ltd. Vs. CCE, Jaipur II was cited, where the Tribunal held that credit would be eligible on certain items used for repairing machinery in the factory.

2. The Revenue contested the decision, arguing that the appellant failed to provide evidence regarding the actual use of the materials. The Revenue also referenced the judgment of the High Court of Andhra Pradesh in Sree Rayalaseema Hi-strength Hypo Ltd. Vs. CCE, Tirupati, stating that goods must be used in the manufacture of capital goods to qualify as inputs.

3. The appellant's counsel cited various cases to support their argument, including Kisan sahkari Chini Mills Ltd. Vs. CCE and Panipat Cooperative Sugar Mills Ltd. Vs. CCE. These cases highlighted that inputs used for repair and maintenance of plant and machinery are eligible for CENVAT credit, as affirmed by multiple High Courts.

4. The Tribunal, after considering all submissions, referenced previous decisions where it was established that goods used for repair and maintenance of machinery qualify for CENVAT credit. The Tribunal emphasized the importance of repair and maintenance activities for smooth manufacturing operations, concluding that the inputs used for such purposes are indeed eligible for credit.

5. Ultimately, the Tribunal rejected the Revenue's appeal, stating that the decisions of various High Courts and the principles discussed in previous cases supported the eligibility of CENVAT credit for the appellant. The Tribunal found no reason to refer the issue to a Larger Bench or Division Bench, affirming the decision to allow the CENVAT credit for the appellant.