2014 (9) TMI 588 - AT - Central Excise

CENVAT Credit - Welding electrodes - Whether cenvat credit is admissible on the welding electrodes used for repair and maintenance of the plant and machinery during the period from March, 2010 to February, 2011 - Held that - Though Apex Court in case of Grasim Industries Ltd. 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. - Following decision of COMMR. OF C. EX., TIRUCHIRAPPALLI Versus INDIA CEMENTS LTD. 2006 (6) TMI 114 - MADRAS HIGH COURT and M/s. Kisan Cooperative Sugar Factory Ltd. Versus CCE, Meerut-I 2013 (8) TMI 98 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues involved:
Admissibility of Cenvat credit on welding electrodes used for repair and maintenance of plant and machinery.

Detailed Analysis:

Issue 1: Admissibility of Cenvat credit on welding electrodes
The appellant, a manufacturer of Paper and Newsprint, appealed against the denial of Cenvat credit on welding electrodes by the Commissioner (Appeals). The dispute centered around whether Cenvat credit was permissible for welding electrodes used in plant and machinery repair during a specific period. The appellant cited Tribunal orders from 2010 and 2011, with conflicting decisions on the admissibility of such credit. The Tribunal's 2011 ruling, aligning with the SAIL case, dismissed the appellant's appeal. However, the Madras High Court stayed this decision, highlighting the ongoing debate on the issue.

Issue 2: Legal Precedents and Interpretations
The appellant's advocate referenced various High Court and Tribunal judgments supporting Cenvat credit eligibility for welding electrodes in repair activities. Conversely, the respondent argued in favor of the Commissioner (Appeals) decision, citing precedents like the Sree Rayalaseema case. The issue's complexity led to a Larger Bench reference to the Supreme Court, emphasizing the legal ambiguity surrounding Cenvat credit for welding electrodes.

Issue 3: Judicial Interpretation and Application
The Tribunal analyzed the legal framework, including Rule 57Q of the Central Excise Rules and Rule 2(k) of the Cenvat Credit Rules, to determine the scope of Cenvat credit eligibility. The judgment extensively referenced judicial interpretations from the Apex Court and various High Courts. Notably, the decision in the Jawahar Mills case emphasized the broad interpretation of 'used in or in relation to manufacture.' The Tribunal's reliance on decisions from Chhattisgarh, Rajasthan, and Karnataka High Courts showcased the diverse legal perspectives on the issue.

Conclusion:
The Tribunal, considering the conflicting precedents and legal interpretations, ruled in favor of the appellant's eligibility for Cenvat credit on welding electrodes used in plant and machinery repair. By aligning with the decisions of certain High Courts and distinguishing others, the Tribunal set aside the impugned order and allowed the appeal. The judgment highlighted the intricate legal landscape surrounding Cenvat credit eligibility, emphasizing the need for clarity and consistency in such matters.