2013 (7) TMI 787 - AT - Central Excise

Welding electrodes used for repair and maintenance of plant and machinery, are eligible for Cenvat Credit or not - Held that - Relying upon the judgment of Hon ble Chhattisgarh High Court in case of Ambuja Cement Eastern Ltd. 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT , it has been held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit - Hon ble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in 2010 (4) TMI 424 - KARNATAKA HIGH COURT has also held that the goods used for repair & maintenance of plant and machinery are eligible for Cenvat Credit Decided in favor of Assessee.

Summary

Issues involved:
- Eligibility of welding electrodes used for repair and maintenance of plant and machinery for Cenvat Credit.

Analysis:

Issue 1: Eligibility of welding electrodes for Cenvat Credit
The case revolved around the eligibility of welding electrodes used for repair and maintenance of plant and machinery for Cenvat Credit during the period from Nov. 2007 to July 2008. The Jurisdictional Assistant Commissioner had denied the Cenvat Credit on welding electrodes and imposed a penalty on the appellant, which was upheld by the Commissioner (Appeals). The appellant argued that welding electrodes were essential for the smooth manufacturing operation of a sugar mill, citing judgments from various High Courts supporting their claim. On the other hand, the departmental representative defended the denial of Cenvat Credit by referring to a Tribunal case and the Apex Court's judgment, stating that welding electrodes used for repair and maintenance are not eligible for Cenvat Credit as repair and maintenance activities are distinct from manufacturing. The Tribunal analyzed the submissions and records, acknowledging the essential nature of regular repair and maintenance of plant and machinery for a Sugar Mills' operations.

Issue 2: Interpretation of the definition of "input"
The Tribunal delved into the definition of "input" as per Rule 2(k) of the Cenvat Credit Rules, 2004, which includes goods used in or in relation to the manufacture of final products, directly or indirectly. Referring to a judgment by the Apex Court, the Tribunal emphasized that goods used in an activity integral to manufacturing, without which commercial feasibility is compromised, should be considered as used in the manufacture of final products. The Tribunal further expanded on the interpretation of the expression "used in or in relation to manufacture," highlighting the commercial feasibility aspect and the wide connotation of the term "in relation to." The Tribunal cited cases from the Hon'ble Calcutta High Court and discussed the importance of repair and maintenance activities in relation to manufacturing, ultimately supporting the eligibility of items used in repair and maintenance for Cenvat Credit.

Conclusion:
After considering the arguments from both sides and reviewing relevant judgments, the Tribunal concluded that the denial of Cenvat Credit on welding electrodes used for repair and maintenance of plant and machinery was not sustainable. The Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of repair and maintenance activities for manufacturing operations and citing supportive judgments from various High Courts.