2006 (6) TMI 114 - HC - Central Excise

Cenvat / Modvat Credit on Capital Goods - welding electrodes used for repairs and maintenance of capital goods are covered under the definition of capital goods in terms of Rule 57Q of the Rules. Revenue Appeal against the order of Tribunal Order dismissed.

Summary

Issues:
Appeal against disallowance of MODVAT credit on welding electrodes and point attack picks under Rule 57Q of the Central Excise Rules, 1944.

Analysis:
The respondent, a cement manufacturer, availed MODVAT credit on welding electrodes and point attack picks under Rule 57Q of the Central Excise Rules, 1944. The lower authority disallowed the credit for these goods, stating they were not specified under Rule 57Q. The Commissioner (Appeals) allowed the appeal for point attack picks but upheld the disallowance for welding electrodes. The Tribunal, however, allowed the appeal, stating that welding electrodes were used for repairs and maintenance of capital goods during production. The main question raised in the appeal was whether welding electrodes used for repairs and maintenance qualify as capital goods under Rule 57Q.

The Tribunal referred to the decision in Jawahar Mills Ltd. v. Commissioner of Central Excise, Coimbatore, where it was held that items like control panels, cables, and welding electrodes qualified as capital goods under Rule 57Q. The Apex Court, in a subsequent case, confirmed this view, stating that various items including power cables, capacitors, control panels, distribution boards, switches, starters, air compressors, and electric wires cables were considered 'capital goods' under Rule 57Q. Another case, Commissioner v. Birla Jute & Industries Ltd., further confirmed that Modvat credit was admissible for welding equipment like electrodes and calibration gas mixture.

The High Court, considering the precedents and the definition of capital goods under Rule 57Q, held in favor of the assessee. It agreed with the Tribunal's decision that welding electrodes used for repairs and maintenance fell under the definition of capital goods. Therefore, the appeal against the disallowance of MODVAT credit on welding electrodes was dismissed. The judgment aligned with previous decisions by the Apex Court and the Tribunal, affirming the eligibility of certain items, including welding electrodes, as capital goods under Rule 57Q.