2015 (5) TMI 19 - AT - Central Excise

Denial of CENVAT Credit - welding electrodes - Cenvat credit sought to be denied on the premise that these welding electrodes are neither inputs nor capital goods - Held that - Particularly for usage of welding electrodes, in reply to the show cause notice, the appellant has explained their usage which was used in the manufacturing of their final product by removing the runners and risers from the ingots. But these contentions have not been controverted by the Revenue neither in the adjudication order nor in the order of Commissioner (Appeals) to deny Cenvat credit . With regard to other steel items which were embedded to earth but not with regard to welding electrodes. - As in the case of Hindustan Zinc Ltd., the Hon'ble Court 2008 (7) TMI 55 - HIGH COURT RAJASTHAN held that if welding electrodes have been used for repair and maintenance of plant and machinery, Cenvat credit is available. Therefore, said decision will prevail over the decisions of Hon'ble High Courts. In these circumstances, I hold that appellant is entitled to take Cenvat credit on welding electrodes which have been used in repair and maintenance of their final product - Decided in favour of assessee.

Summary

Issues:
- Denial of Cenvat credit on welding electrodes

Analysis:
The appellant, a manufacturer of MS ingots and steel bars, appealed against the denial of Cenvat credit on welding electrodes. The dispute arose as the authorities contended that welding electrodes did not qualify as inputs or capital goods. The appellant argued that the welding electrodes were used in various manufacturing processes, including removing runners and risers from ingots and cutting steel bars. The adjudicating authority acknowledged the usage of welding electrodes in the fabrication of capital goods but ultimately denied the Cenvat credit based on the allegation that the electrodes were used for activities not directly related to manufacturing capital goods.

In the hearing, the appellant's counsel cited precedents from High Courts to support their claim for Cenvat credit. Conversely, the Revenue relied on various decisions to counter the appellant's arguments. The presiding member examined the records and noted that the appellant had adequately explained the usage of welding electrodes in their manufacturing processes, specifically in the production of final products by removing runners and risers from ingots. The Revenue failed to refute these explanations, leading to the conclusion that the denial of Cenvat credit was unjustified, especially considering that the electrodes were not used for activities unrelated to manufacturing capital goods.

Regarding the case laws cited by the Revenue, the presiding member distinguished them from the present case, highlighting that those decisions did not address the specific usage of welding electrodes as explained by the appellant. Additionally, the member emphasized the significance of the Supreme Court's ruling in a related case, which established that Cenvat credit is permissible when welding electrodes are used for repair and maintenance of plant and machinery. Given these considerations, the presiding member ruled in favor of the appellant, allowing them to claim Cenvat credit on welding electrodes used for repair and maintenance in their manufacturing processes. Consequently, the appeals were allowed, and the appellant's entitlement to Cenvat credit was upheld.