2009 (7) TMI 217 - AT - Central Excise

Credit on welding electrodes used for repair of machinery - It was the claim of the appellants that the welding electrodes were the inputs used in relation to the manufacture of the final product namely cement. process of repairs and maintenance of the machinery used in the manufacture of the final product is not integrally related to the process of the manufacture of the final product and, therefore, the products utilized for the repairs and manufacture cannot be termed as input for the manufacture or having utilized in relation to manufacture of the final products. Activity of repairs and maintenance does not form part of the process of manufacture of the final product. Hence welding electrodes are not inputs and not eligible for credit Moreover, Credit held as not admissible by Tribunal Larger Banch in the matter of Jaypee Rewa Plant v. CCE, Raipur and SLP against such order rejected after recording reason Larger Banch decision binding on Tribunal SC order stating that on consideration of facts, SLP rejected - SLP rejected on consideration of facts means SLP rejected by passing speaking order Since in the adjudication order limitation aspect was not considered in the manner in which it ought to be considered, matter remanded to original authority to consider limitation Regarding definition of input , Court or Tribunal are not empowered to expand meaning of term under the guise of interpretation when the same defined by legislature - As far as penalty aspect is concerned the same will have to be considered alongwith the issue of bar of limitation.

Issues Involved:
1. Entitlement to Cenvat credit on welding electrodes used for repair and maintenance of machinery.
2. Invocation of the extended period of limitation for the demand of Cenvat credit.
3. Imposition of penalties under various rules and sections.

Detailed Analysis:

1. Entitlement to Cenvat Credit on Welding Electrodes:
The appellants claimed Cenvat credit on welding electrodes used for repair and maintenance of machinery, asserting that these electrodes are inputs used in the manufacture of cement. They argued that maintaining operational machinery is essential for manufacturing the final product, thus welding electrodes should be considered as inputs.

The Department contended that welding electrodes used for repair and maintenance cannot be classified as inputs used in the manufacturing process of the final product. They argued that repair and maintenance activities are not integrally related to the manufacturing process.

The Tribunal referred to the Larger Bench decision in Jaypee Rewa Plant v. CCE, Raipur, which held that welding electrodes used for repairs and maintenance are not eligible for Cenvat credit. The Tribunal also considered the decision of the Rajasthan High Court in Hindustan Zinc Limited, which allowed Cenvat credit for welding electrodes used in repairs and maintenance. However, the Tribunal noted that the Supreme Court's dismissal of the SLP in SAIL's case, which followed Jaypee Rewa Plant, was a speaking order and thus binding.

The Tribunal concluded that the welding electrodes used for repair and maintenance do not qualify as inputs under the Cenvat Credit Rules, 2002 and 2004, as they are not used directly or indirectly in the manufacturing process of the final product.

2. Invocation of Extended Period of Limitation:
The appellants argued that the extended period of limitation should not be invoked as the Department was aware of their practice of availing Cenvat credit on welding electrodes since 2003. They contended that the Department's silence until the issuance of the show cause notice in 2008 indicated no suppression of facts.

The Department argued that the specific use of welding electrodes was not disclosed, constituting suppression of facts. They emphasized the self-assessment system, which requires the appellants to ensure that Cenvat credit is availed only on admissible inputs.

The Tribunal found that the adjudicating authority and the Commissioner (Appeals) did not adequately address the issue of limitation. It noted that the authorities failed to analyze whether the Department had knowledge of the appellants' actions that could reveal evasion of duty. The Tribunal remanded the matter to the original authority to reconsider the issue of limitation after examining all materials on record.

3. Imposition of Penalties:
The penalties imposed under Rule 13 of the Cenvat Credit Rules, 2002, Rule 15 of the Cenvat Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944, were also contested. The Tribunal decided that the issue of penalties should be considered along with the issue of limitation.

Conclusion:
The Tribunal confirmed the denial of Cenvat credit on welding electrodes used for repairs and maintenance of machinery. It remanded the matter to the original authority to reconsider the issue of limitation and the imposition of penalties after hearing the parties and examining the materials on record. The appeal was disposed of with these directions.

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