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2010 (11) TMI 34 - SC - Central ExciseInputs scope of inclusive part of the definition of input Rule 2(g) of the Cenvat Credit Rules 2004 Held that having regard to the language of Rule 2(g) of the 2002 Rules and the analysis of the aforenoted decisions it appears that by employing the phrase and includes legislature did not intend to impart a restricted meaning to the definition of inputs and therefore the interpretation of the said term in Maruti Suzuki Limited (2009 -TMI - 34348 - SUPREME COURT) may require reconsideration by a larger bench.
Issues Involved:
1. Eligibility of welding electrodes for CENVAT credit as "inputs" under the CENVAT Credit Rules, 2002. 2. Imposition of penalty and interest for availing CENVAT credit on welding electrodes. Issue-wise Detailed Analysis: 1. Eligibility of Welding Electrodes for CENVAT Credit as "Inputs": The primary issue in these civil appeals is the eligibility of welding electrodes used in the maintenance of machines for CENVAT credit under the CENVAT Credit Rules, 2002. The Customs, Excise and Service Tax Appellate Tribunal (the Tribunal) had held that welding electrodes used for maintenance do not qualify as "inputs" under Rule 2 of the 2002 Rules. This decision was based on previous rulings, including CCE, Belgaum Vs. Panyam Cements & Mineral Inds. and Kanoria Sugars & General Manufacturing Co. Vs. CCE, which concluded that welding electrodes used solely for maintenance purposes were not eligible for credit. The appellant argued that welding electrodes should be considered "inputs" as defined in Rule 2(g) of the 2002 Rules, citing the Supreme Court's decisions in Maruti Suzuki Limited Vs. Commissioner of Central Excise, Delhi-III and Vikram Cement Vs. Commissioner of Central Excise, Indore. The definition of "inputs" under Rule 2(g) includes all goods used in or in relation to the manufacture of final products, whether directly or indirectly. In Maruti Suzuki Limited, the Court divided the definition of "input" into three components: the specific part, the inclusive part, and the place of use. It was emphasized that for a good to qualify as an "input," it must meet all three parts of the definition. The Court noted that the term "inputs" is broad and includes goods used in the manufacture of capital goods within the factory. The Supreme Court observed that the definition of "inputs" in Rule 2(g) is expansive and not restricted to the six categories mentioned in the inclusive part of the definition. The Court referenced the State of Bombay Vs. The Hospital Mazdoor Sabha and Regional Director, Employees' State Insurance Corporation Vs. Highland Coffee Works to support the interpretation that the term "includes" in the definition should be given a wide meaning, indicating an intention to broaden the scope rather than restrict it. Given this understanding, the Supreme Court suggested that the interpretation of "inputs" in Maruti Suzuki Limited might require reconsideration by a larger bench. The Court directed that the papers be placed before the Chief Justice of India for constituting a larger bench to re-examine this issue. 2. Imposition of Penalty and Interest: The Tribunal upheld the imposition of penalty and interest on the appellant for availing CENVAT credit on welding electrodes. The Assistant Commissioner, Central Excise, Meerut, had confirmed the demand for the wrongly availed credit amounting to Rs. 1,33,871/- along with interest and an equal amount as a penalty under Rule 13 of the 2002 Rules and Section 11AB of the Central Excise Act, 1944. The appellant contended that there was no intention to evade duty, citing conflicting judicial pronouncements on the issue. However, the Commissioner (Appeals) and the Tribunal found that the appellant was aware that CENVAT credit on welding electrodes was not admissible and had availed the credit to evade duty. The Tribunal noted that the appellant did not respond to the Superintendent's letters requiring them to reverse the credit, indicating an intention to evade duty. The Supreme Court did not interfere with the Tribunal's findings on the imposition of penalty and interest, as the authorities had valid reasons for their decisions. Conclusion: The Supreme Court directed that the matter regarding the eligibility of welding electrodes as "inputs" under the CENVAT Credit Rules, 2002, be reconsidered by a larger bench. The imposition of penalty and interest by the lower authorities was upheld, as the appellant was found to have availed the credit with the intention to evade duty.
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