2015 (8) TMI 1003 - HC - Central Excise

Denial of CENVAT Credit - Whether Cenvat Credit is admissible on Welding Electrodes (falling under Chapter Heading No. 8311.00) as Capital goods used in the repair and maintenance notwithstanding the ruling of the Hon ble Supreme Court - Held that - The items which fall under certain chapters of Central Excise Tariff Act are specifiably mentioned in Rule 2(a)(A)(i) of Rules, 2004. Then comes pollution control equipment , moulds and dies, jigs and fixtures, refractories and refractory material, tubes and pipes and fittings thereof and storage tank. All these things, if used in the factory of manufacturer of final products, or, for providing output service, would mean capital goods . However, it would not include any equipment or appliance used in office. There is one more aspect, i.e., Rule 2(a)(A)(iii) of Rules, 2004, which says that in respect to items mentioned in Rule 2(a)(A)(i) and (ii) of Rules, 2004, components, spares and accessories of the goods specified thereunder would also fall within the category of capital goods . - capital goods as defined under Rule 2(a) of Rules 2004, in substance, are pari-materia with the capital goods specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein. - Decision in the case of M/s Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise 2015 (5) TMI 569 - ALLAHABAD HIGH COURT followed - Decided in favour of Revenue.

Summary

Issues Involved:
1. Admissibility of CENVAT Credit on Welding Electrodes as Capital Goods.

Detailed Analysis:

Issue 1: Admissibility of CENVAT Credit on Welding Electrodes as Capital Goods:
The appeal under Section 35-G of the Central Excise Tax Act, 1944 was filed by the Revenue against the judgment of the Custom, Excise and Service Tax Appellate Tribunal, New Delhi, which allowed the Assessee's appeal regarding the eligibility of 'Welding Electrode' for CENVAT Credit. The Assessee, a sugar manufacturing Industry, claimed that 'Welding Electrode' falls under Chapter Heading No. 8311.00 of the Central Excise Tariff and is used in the repair and maintenance of machines, thus qualifying as 'Capital Goods'. The Tribunal accepted this claim, leading to the Revenue's appeal before the High Court.

The main contention raised by the appellant was that 'Welding Electrodes' do not classify as 'Capital Goods' under Rule 57-Q of the Central Excise Rules, 1944. The crucial question before the Court was whether CENVAT Credit is admissible on Welding Electrodes as Capital goods used in repair and maintenance, despite the ruling of the Hon'ble Supreme Court. The period of dispute for the CENVAT Credit acceptance was from November 2004 to September 2005, governed by the CENVAT Credit Rules, 2004. The definition of 'Capital Goods' under Rule 2(a) of the Rules, 2004 was examined, which did not explicitly include the Heading of Chapter 8311. The Assessee argued that 'Welding Electrodes' could be considered 'components' under Rule 2(a)(A)(iii) of the Rules, 2004, and thus should be categorized as 'Capital Goods'.

The Court noted that the definition of 'capital goods' under Rule 2(a) of the Rules, 2004 is exhaustive and specifically lists the items falling under certain chapters of the Central Excise Tariff Act. While 'Welding Electrodes' were not explicitly mentioned, the Assessee relied on Rule 2(a)(A)(iii) to argue for their inclusion as 'components' under 'capital goods'. The Court emphasized that 'capital goods' encompass items used in the factory for manufacturing final products or providing output services, excluding office equipment. Drawing parallels with Rule 57-Q of the Rules, 1944, a similar argument had been previously considered by the Court in a related case, where the question was resolved in favor of the Revenue.

Ultimately, based on the precedent and reasoning from a prior judgment, the Court ruled in favor of the Revenue, allowing the appeal and quashing the Tribunal's order dated 12.03.2009. No costs were awarded in the matter.

This detailed analysis provides a comprehensive overview of the legal judgment, focusing on the issues involved and the Court's reasoning in deciding the admissibility of CENVAT Credit on Welding Electrodes as Capital Goods.