2004 (1) TMI 285 - AT - Central Excise

Summary

Issues: Availability of Modvat credit on welding electrodes used in repair and maintenance of machinery in a sugar factory.

In this case, the Appellate Tribunal CESTAT, New Delhi, heard an appeal by the Revenue against the Order-in-Appeal passed by the ld. Commissioner (Appeals) regarding the availability of Modvat credit on welding electrodes used in the repair and maintenance of machinery in a sugar factory. The dispute revolved around the interpretation of the term "input" and whether the credit on welding electrodes could be claimed as inputs. The Commissioner (Appeals) had allowed the credit on welding electrodes as inputs from 1-3-2001 onwards based on the enlarged definition of "input" introduced through Notification No. 6/01-C.E.(N.T.), dated 1-3-2001. The Revenue contested this decision on the grounds that once the credit is claimed under the category of capital goods, it cannot be permitted under "input." The Revenue also argued that the welding electrodes were used in the repair of machinery, not in the manufacture of capital goods, making them ineligible for credit as inputs.

After hearing both sides, the Tribunal noted that the welding electrodes were used for repair, maintenance, and installation of capital goods in the factory, but the enlarged definition of "input" still required the use to be "for manufacture of capital goods." Since the welding electrodes were used for repair and installation, activities that do not qualify as "use for manufacture of capital goods," the Commissioner (Appeals) erred in allowing the Modvat credit on welding electrodes as inputs. Consequently, the Tribunal allowed the appeal of the Revenue and set aside the Order-in-Appeal passed by the Commissioner (Appeals).