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2005 (11) TMI 161 - AT - Central ExciseCenvat/Modvat - inputs - activity of welding the punctured tubes and pipes at regular intervals - Whether welding electrodes used directly or indirectly in relation to manufacture of final product ? - HELD THAT - Applying the ratio of the judgment in the case of CCE, Chandigarh-II v. National Fertilizer Ltd. 2001 (10) TMI 111 - HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH , which in turn refers to two Supreme Court judgments, and by following the ratio of the Larger Bench judgments rendered in Modi Rubber Ltd. 2000 (5) TMI 64 - CEGAT, NEW DELHI and Union Carbide Ltd. 1996 (6) TMI 308 - CEGAT, NEW DELHI-LB , the appellant's plea is required to be accepted. The inputs viz. Welding Electrodes, Oxyygen Gas and Acetylene Gas used for welding the punctured pipes carrying the hot sugar juice should be treated as part of process of manufacture and hence they are eligible inputs for the manufacture of the final product. The appeal is allowed with consequential relief, if any.
Issues Involved:
1. Eligibility for Modvat credit on welding electrodes, oxygen gas, and acetylene gas used for welding punctured pipes. 2. Interpretation of "in or in relation to manufacture of final goods." 3. Consideration of maintenance and overhauling as part of the manufacturing process. Detailed Analysis: Issue 1: Eligibility for Modvat Credit The appellant, a sugar manufacturer, contended that welding electrodes, oxygen gas, and acetylene gas used for welding punctured pipes should be eligible for Modvat credit as these activities are integral to the manufacturing process. The authorities denied this benefit, classifying the welding activities as repair and maintenance rather than manufacturing. Issue 2: Interpretation of "In or In Relation to Manufacture of Final Goods" The appellant argued that the activity of welding punctured pipes is essential for the continuous operation of the sugar plant and should be considered as "in or in relation to manufacture of final goods." They cited the Punjab & Haryana High Court's judgment in CCE v. National Fertilizer Ltd., which recognized maintenance and overhauling as integral to the production process, thus qualifying for duty set-off. Issue 3: Consideration of Maintenance and Overhauling as Part of the Manufacturing Process The appellant referenced several judgments, including the Supreme Court's decisions in CCE v. Eastend Paper Industries Ltd., Indian Farmers Fertilizer Co-operative Ltd. v. CCE, and M/s. Steel Authority of India Ltd. v. CCE, which supported the view that maintenance activities are integral to manufacturing. The Tribunal's Larger Bench in Jaypee Rewa Plant v. CCE had previously held that welding electrodes and gases used in repair and maintenance were not eligible for Modvat credit. However, the appellant argued that this decision overlooked the binding judgments of higher courts, which recognized maintenance as part of the manufacturing process. Tribunal's Analysis and Conclusion: The Tribunal noted that the Larger Bench in Jaypee Rewa Plant did not consider earlier decisions such as CCE v. Modi Rubber Ltd., which recognized the necessity of lubricants in machinery as integral to manufacturing. The Tribunal also referred to the Punjab & Haryana High Court's judgment, which emphasized that maintenance and overhauling are essential for effective plant operation and thus part of the manufacturing process. The Tribunal concluded that the activity of welding punctured pipes using welding electrodes, oxygen gas, and acetylene gas is integral to the manufacturing process. It relied on the judgments of the Punjab & Haryana High Court and the Supreme Court, which supported the inclusion of maintenance activities as part of manufacturing. Therefore, the Tribunal allowed the appeal, granting the benefit of Modvat credit for the inputs used in welding. Judgment: The appeal was allowed with consequential relief, recognizing welding electrodes, oxygen gas, and acetylene gas used for welding punctured pipes as eligible inputs for Modvat credit, as they are integral to the manufacturing process of the final product.
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