2023 (12) TMI 4 - AT - Central Excise

Recovery of credit taken wrongly and utilized alongwith interest and penalty - capital goods or not - welding electrodes falling under Chapter Sub Heading 831100 - period from October 2006 to February 2007 - HELD THAT - The use of welding electrodes are integrally connected to capital goods and thereby with the process of manufacture. They are used for the maintenance of capital goods installed in the appellant s plant. Without the use of welding electrodes, during maintenance of capital goods whenever necessary, the machine may not function and manufacture would be impossible or commercially inexpedient. Welding electrodes which are hence used in relation to the manufacture of final products come under the definition of inputs as per Rule 2 of CENVAT Credit Rules, 2004. Therefore, the eligibility of the said inputs for CENVAT credit cannot be denied. Reliance can be placed in the case of M/S. TAMILNADU NEWSPRINTS PAPER LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE 2017 (6) TMI 574 - MADRAS HIGH COURT where it was held that the said issue is covered by the judgment of the Division Bench of this Court in the matter of THE NATIONAL CO-OPERATIVE SUGAR MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2016 (7) TMI 1073 - MADRAS HIGH COURT , where it was held that Judicial pronouncements makes it abundantly clear that welding electrodes used for repair and maintenance of machineries, in relation to manufacture of the final product, namely sugar, is eligible for CENVAT credit. The impugned order dated 04/02/2015 passed by the Commissioner of Central Excise (Appeals), Coimbatore is set aside - Appeal allowed.

Summary

Issues involved:
The issue involves the eligibility of CENVAT credit on welding electrodes used in maintenance and repair of capital goods for the manufacture of cement under Rule 2 of CENVAT Credit Rules, 2004.

Comprehensive details of the judgment:

1. The appellant, a manufacturer of cement and clinker, availed CENVAT credit on welding electrodes used in maintenance of capital goods. The Revenue contended that welding electrodes were not covered under the definition of capital goods. Three Show Cause Notices were issued proposing recovery of wrongly availed credit, interest, and penalty. Orders confirmed the demand, upheld on appeal, leading to the appeal before the Tribunal.

2. The appellant argued that welding electrodes were used for maintenance of capital goods essential for cement manufacture, making them eligible for CENVAT Credit. Various judgments supported this stance. The Revenue reiterated the points in the impugned order.

3. The Tribunal analyzed Rule 2 of the CENVAT Credit Rules, 2004, defining 'inputs'. Previous judgments, including those involving Madras Cements Ltd., Union of India Vs. Hindustan Zinc Ltd., and Dalmia Cement (Bharat) Ltd., were considered to determine the eligibility of welding electrodes for CENVAT credit.

4. The Tribunal noted that the usage of the word 'input' is broad, and activities 'in or in relation to manufacture' encompass all processes converting raw materials into finished goods. Welding electrodes were found to be integrally connected to capital goods and the manufacturing process, essential for maintaining machinery and enabling production. Therefore, they fell under the definition of 'inputs' as per Rule 2, making them eligible for CENVAT credit.

5. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief as per law.

Separate Judgment (if applicable):
No separate judgment was delivered by the judges in this case.