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2019 (6) TMI 317 - AT - Central ExciseCENVAT credit - inputs - welding electrodes used within the factory of manufacture after 01.04.2011 - HELD THAT - It is not in dispute that the welding electrodes in question were used after 01.04.2011 when the definition of inputs has been enlarged to include all goods used in the factory of manufacture of the final products subject to some exceptions. The only exception which the department relies on is clause (F) of Rule 2(k) on the ground that the welding electrodes being used in the maintenance and repair of capital goods have no relationship whatsoever with the manufacture of the final products. If welding electrodes are used for repair and maintenance of machinery and such machinery are used in manufacture of final products and the welding electrodes are used within the factory of manufacture, they are squarely covered by the definition of inputs under Rule 2(k) of CENVAT Credit Rules 2004. Appellant are entitled to CENVAT Credit on the welding electrodes so used - credit allowed - appeal allowed - decided in favor of appellant.
Issues: Entitlement to CENVAT credit on welding electrodes used post 01.04.2011 within the factory of manufacture.
Analysis: 1. The issue in consideration is whether the appellant is entitled to CENVAT credit on welding electrodes used within the factory of manufacture post 01.04.2011. The Revenue contended that the welding electrodes were not used in the manufacture of final products but for maintenance and repair of machinery, leading to the issuance of show cause notices and demands for recovery of CENVAT credit availed by the appellant. 2. The appellant appealed before the first Appellate Authority, which upheld the lower authority's order confirming the demands and penalties proposed. The appellant argued that the amended Rule 2(k) of CENVAT Credit Rules 2004, effective from 01.04.2011, expanded the definition of 'inputs' to include all goods used in the factory by the manufacturer of final products, without excluding welding electrodes. The appellant emphasized that the welding electrodes were used within the factory of manufacture of final products, establishing a direct relationship between their use and the manufacture process. 3. The Tribunal analyzed the arguments and records, noting that the welding electrodes were used post 01.04.2011, falling under the expanded definition of 'inputs.' The department relied on clause (F) of Rule 2(k) to argue that welding electrodes used for maintenance and repair of capital goods have no relationship with the manufacture of final products. However, the Tribunal disagreed with this interpretation, stating that if welding electrodes are used for machinery used in the manufacture of final products within the factory, they qualify as 'inputs' under Rule 2(k) of CENVAT Credit Rules 2004. 4. The Tribunal referred to a similar case previously decided by the Bench, where CENVAT credit was allowed on welding electrodes used for repair and maintenance of capital goods within the factory of manufacture. Consequently, the Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief to the appellant. The judgment emphasized the direct relationship between the use of welding electrodes and the manufacturing process, entitling the appellant to CENVAT credit in this case.
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