2003 (12) TMI 210 - AT - Central Excise

Summary

Issues:
1. Denial of credit on Oxygen Gas, Dissolved Acetylene, Welding Rods, and Welding Electrodes.
2. Denial of credit on Red Colour.
3. Denial of input duty credit on HDPE/PP Tank, OTR Tyres, Tubeless Tyres, and Lift Cylinder Assembly.

Analysis:

1. Denial of credit on Oxygen Gas, Dissolved Acetylene, Welding Rods, and Welding Electrodes:
The Commissioner (Appeals) disallowed credit on these items based on the decision in Century Cement v. Collector, while the appellants cited the decision in Mahiar Cement v. CCE, which allowed credit for similar items. However, a Larger Bench of the Tribunal in Jaypee Rewa Plant v. C.C.E. held that only goods used in a specific activity within the manufacturing process are eligible for credit. Welding Electrodes and Gases used in repair and maintenance were deemed ineligible. Consequently, the denial of credit by the lower authorities was upheld.

2. Denial of credit on Red Colour:
The lower authorities denied credit on red colour used for painting Naphtha Pipe Line, stating it did not contribute to the manufacture of the final product. This decision aligns with the ruling in Jaypee Rewa. Therefore, the denial of credit on red colour was deemed justified.

3. Denial of input duty credit on HDPE/PP Tank, OTR Tyres, Tubeless Tyres, and Lift Cylinder Assembly:
These items were treated as capital goods by the lower authorities, as they were not claimed under Rule 57Q. The Tribunal upheld this classification, stating that goods not directly eligible for Modvat credit under Rule 57Q cannot be considered inputs. The items were used for purposes such as handling materials and service tanks, not directly in the manufacturing process. Therefore, the denial of input duty credit on these items was upheld.

In conclusion, the appeal was rejected, except for setting aside the penalty due to the disputed nature of the claim and conflicting decisions on the issues.