2016 (7) TMI 490 - AT - Central Excise

Denial of credit on welding electrodes used for repair and maintenance - appellants are manufacturers of cement and cement clinker and are availing credit on inputs and capital goods - Held that - Relying upon the judgments laid in Bhushan Steel Ltd (2015 (10) TMI 1370 - CESTAT NEW DELHI) and Kisan Cooperative Sugar Factory Ltd (2013 (8) TMI 98 - CESTAT NEW DELHI ), hold that credit is admissible. Welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - Decided in favour of assessee

Summary

Issues: Denial of credit on welding electrodes used for repair and maintenance.

Analysis:
1. Issue of Credit Denial: The case involves the denial of credit on welding electrodes used for repair and maintenance by the appellants, who are manufacturers of cement and cement clinker. The department contended that credit on welding electrodes as inputs is inadmissible, leading to the issuance of a show cause notice.

2. Appellant's Argument: The appellant's counsel argued that periodic repair of plant and machinery is essential due to wear and tear in the manufacturing process. They emphasized that welding electrodes are crucial for such repairs without which the manufacturing process would not be commercially feasible. The counsel cited judgments in support of their argument, highlighting the necessity of repair and maintenance for the manufacturing process.

3. Definition of Inputs: The counsel referred to the amendment in the definition of inputs effective from 01-04-2011. The definition states that inputs include all goods used in the factory by the manufacturer of the final product, except those with no relationship with the final product's manufacture. The circular clarified that goods used in or in relation to the manufacture of final products, directly or indirectly, are eligible for credit unless they have absolutely no relationship with the final product.

4. Respondent's Stand: The AR for the respondent reiterated the findings in the impugned order, arguing that welding electrodes should not be considered as inputs since they are used for repair and maintenance, not in the manufacture of dutiable goods. A judgment was cited to support this argument.

5. Tribunal's Decision: The Tribunal examined the judgments cited by both parties and noted that the judgment relied on by the Revenue pertained to the definition of input before 01-04-2011. In contrast, the Tribunal favored the appellant by considering the necessity of regular repair and maintenance using welding electrodes for the commercial feasibility of manufacturing operations. Relying on previous judgments, the Tribunal held that credit on welding electrodes is admissible.

6. Conclusion: Consequently, the impugned order denying credit on welding electrodes for repair and maintenance was set aside, and the appeal was allowed with any consequential reliefs. The judgment emphasizes the importance of repair and maintenance activities in the manufacturing process, supporting the admissibility of credit on welding electrodes used for such purposes.