2023 (12) TMI 1303 - SC - Central Excise

CENVAT Credit - Inputs used for repairing and maintenance of the plant and machinery, as capital goods. - eligible inputs for availing credit under the relevant Modified Valued Added Tax (Modvat) and Central Value Added Tax (Cenvat) Credit Rules, as amended from time to time or not - HELD THAT - In view of the settled legal position, the interpretation of the expression used in or in relation to manufacture is of a very wide import and takes within its scope and ambit all items used in the process of manufacture whether directly or indirectly and whether contained in the final product or not. The items used for maintenance of plant and machinery are also items used in the manufacture of finished goods. Hence, credit on the items used for maintenance, repair, upkeep or fabrication of plant and machinery are admissible to the assessees. The credit on welding electrodes and other items such as jointing sheets, SS plates etc. used for maintenance, repair, up-keep or fabrication of plant and machinery are admissible to the assessees. Appeal allowed.

Summary

Issues Involved:

1. Eligibility of products like welding electrodes, paint, varnish, MS plates, jointing sheets, etc., as "eligible inputs" for availing credit under Modvat and Cenvat Credit Rules.
2. Interpretation of the expression "used in or in relation to manufacture" for availing credit.

Summary:

Issue 1: Eligibility of Products as "Eligible Inputs"

The primary issue in this batch of civil appeals is whether products such as welding electrodes, paint, varnish, MS plates, jointing sheets, etc., used within the factory for repair, maintenance, fabrication, and upkeep of capital goods, qualify as "eligible inputs" for availing credit under Modvat and Cenvat Credit Rules. The relevant facts from various cases were summarized, showing the disputed items and their use within the factory for maintenance and repair purposes.

Issue 2: Interpretation of "Used in or in Relation to Manufacture"

The court examined the historical context and amendments of the Central Excise Rules, 1944, and subsequent rules under the Modvat and Cenvat schemes, emphasizing the broad interpretation of the term "used in or in relation to manufacture."

Submissions on Behalf of the Assessee:

- The Modvat Credit Scheme was designed to avoid the cascading effect of taxation, allowing credit on items used in or in relation to the manufacture of finished goods.
- The term "inputs" has been interpreted broadly in various judgments, including Indian Farmers Fertilizer Cooperative Limited vs. Collector of Central Excise, Ahmedabad, and Ramala Sahkari Chini Mills Ltd. vs. Commissioner, Central Excise, Meerut-I.
- The items used for maintenance and post-manufacturing activities are integral to the manufacturing process and should be eligible for credit.

Submissions on Behalf of the Revenue:

- The Revenue argued that the disputed items do not play a role in the manufacturing process of the final products and are used only for maintenance.
- The case law cited by the assessee was deemed inapplicable to the present matters.

Findings:

The court concluded that the expression "used in or in relation to manufacture" must be interpreted expansively, covering all items used in the manufacturing process, whether directly or indirectly. The items used for maintenance of plant and machinery are also considered as used in the manufacture of finished goods.

Conclusion:

The appeals were allowed, recognizing that credit on welding electrodes and other items used for maintenance, repair, upkeep, or fabrication of plant and machinery is admissible to the assessees.