2015 (9) TMI 824 - HC - Central Excise

Denial of CENVAT Credit - Welding Electrode - Whether it is capital goods - Held that - The definition of capital goods under Rule 2(b) of Rules, 2002 and Rule 2(a) of Rules, 2004 is exhaustive in the sense that it clearly specifies what capital goods would mean. The items which fall under certain chapters of Central Excise Tariff Act are specifiably mentioned in Rule 2(b)(i) of Rules, 2002 and Rule 2(a)(A)(i) of Rules, 2004. Then comes pollution control equipment , moulds and dies, jigs and fixtures, refractories and refractory material, tubes and pipes and fittings thereof and storage tank. All these things, if used in the factory of manufacturer of final products, or, for providing output service, would mean capital goods . However, it would not include any equipment or appliance used in office. There is one more aspect, i.e., Rule 2(b)(iii) of Rules, 2002 and Rule 2(a)(A)(iii) of Rules, 2004, which say that in respect to items mentioned in Rule 2(b)(i) and (ii) of Rules, 2002 and Rule 2(a)(A)(i) and (ii) of Rules, 2004, components, spares and accessories of the goods specified thereunder would also fall within the category of capital goods . - For the reasons given in the judgment in M/S Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise (2015 (5) TMI 569 - ALLAHABAD HIGH COURT), the aforesaid question of law is answered in favour of Revenue - Decided in favour of Revenue.

Summary

Issues:
1. Admissibility of CENVAT Credit on Welding Electrodes as Capital Goods under Central Excise Rules, 1944.

Detailed Analysis:
1. The appeal under Section 35-G of the Central Excise Tax Act, 1944 was filed by the Revenue against the judgment of the Custom, Excise and Service Tax Appellate Tribunal, New Delhi, which allowed the Assessee's appeal claiming that 'Welding Electrode' is eligible for CENVAT Credit.
2. The Assessee, engaged in the manufacture of Sugar, argued that 'Welding Electrode' falls under Head 8311.00 of the Central Excise Tariff and is used in the repair and maintenance of machines, thus qualifying as 'Capital Goods'.
3. The primary question before the court was whether CENVAT Credit is admissible on Welding Electrodes as Capital goods used in repair and maintenance, despite not being specifically listed under the definition of 'Capital Goods'.
4. The definition of 'Capital Goods' under the CENVAT Credit Rules, 2002 and 2004, includes specific categories of goods used in the factory of the manufacturer of final products, excluding office equipment. The Assessee argued that Welding Electrodes should be considered 'components' falling under the category of 'Capital Goods'.
5. The court found that the definition of 'Capital Goods' is exhaustive and includes items specified under certain chapters of the Central Excise Tariff Act, along with components, spares, and accessories of such goods. The Assessee's contention was based on the term 'components' under the Rules.
6. Referring to a previous judgment, the court concluded that the definition of 'Capital Goods' under the Rules is similar to that specified in Rule 57-Q of the Central Excise Rules, 1944, with no substantial difference.
7. A similar argument was considered previously by the court, leading to the decision that the question of law is answered in favor of the Revenue and against the Assessee.
8. Based on the reasoning in the previous judgment, the court allowed the appeal, quashing the Tribunal's order in favor of the Revenue.
9. The appeal was allowed with no order as to costs, concluding the legal proceedings on the admissibility of CENVAT Credit on Welding Electrodes as Capital Goods under the Central Excise Rules, 1944.