2005 (6) TMI 51 - AT - Central Excise

Cenvat/Modvat - Welding electrodes - Capital goods - Whether welding electrodes are covered under the definition of capital goods as provided under Rule 57Q of the Central Excise Rule - HELD THAT - The appellants are not disputing the fact that welding electrodes are classifiable under Heading 83.11 of the Central Excise Tariff. As such, the welding electrodes are not covered under Serial Nos. 1 to 4 of the above Rule. The appellant claim is that these are used in the repair of machines, therefore, become components and these become component, spare or accessories of the goods specified under Serial Nos. 1 to 4 of Rule 57Q of the Central Excise Rules. On a specific query from the Bench that welding electrodes are part, component or accessory of which machines. Counsel appearing on behalf of the appellants could not explain this situation. There is no material produced by the appellants shw (sic) that claimed welding electrodes all used for the purpose other than maintenance. As such, welding electrodes are used in the maintenance of the capital goods and under the provisions of Rule 57Q of the Central Excise Rules, 1944, the goods used for maintenance are not covered. Thus, we hold that appellants are not entitled for the benefit of Modvat credit as capital goods during the relevant period. The issue referred to the Larger Bench is answered in favour of the Revenue and the matter is to be placed before the regular bench for further action.

Summary

Issues:
Eligibility of Modvat credit for welding electrodes as capital goods.

Analysis:
The appellant claimed Modvat credit for welding electrodes under Rule 57Q of the Central Excise Rules from October to December 1999. They argued that welding electrodes are used in the repair of capital goods, making them components eligible for credit as capital goods. They contended that the repair of machines is directly related to manufacturing finished goods, citing a Tribunal decision in a similar case.

The Revenue opposed the claim, stating that welding electrodes are not covered under the definition of capital goods in Rule 57Q during the relevant period. They argued that welding electrodes do not qualify as components, spares, or accessories of specified goods, referencing the definition provided in Words & Phrases by S.B. Sarkar. The Revenue also relied on a Tribunal decision that welding electrodes are not entitled to Modvat credit as inputs, as they are only used for repair purposes.

The appellant maintained that welding electrodes fall under the definition of capital goods as per Rule 57Q. They pointed out that welding electrodes are not covered under the specific categories listed in the rule but are used in the repair of machines, making them components, spares, or accessories of the specified goods. The appellant failed to provide evidence that welding electrodes were used for purposes other than maintenance, leading to the conclusion that they are not entitled to Modvat credit as capital goods under Rule 57Q.

In conclusion, the Tribunal held that the appellants are not eligible for Modvat credit as capital goods during the relevant period. The issue was answered in favor of the Revenue, and the matter was to be referred back to the regular bench for further action.