2017 (1) TMI 1019 - HC - Central Excise

CENVAT Credit - Welding Electrode - whether the welding electrodes would fall under the category of capital goods? - Held that - capital goods as defined under Rule 2(b) of Rules, 2002 and 2(a) of Rules 2004, in substance, are pari-materia with the capital goods specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein - reliance placed in the case of M/S Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise 2015 (5) TMI 569 - ALLAHABAD HIGH COURT , where it was held that it cannot be said that Welding Electrodes satisfy the requirement so as to constitute component of items mentioned in column nos. 1 to 4 of table in Rule 57Q(1) of Rules, 1944 - decided against assessee. Appeal allowed - decided partly in favor of assessee and partly in favor of Revenue

Summary

Issues:
Appeal under Section 35-G of Central Excise Tax Act, 1944 regarding eligibility of 'Welding Electrode' for CENVAT Credit.

Analysis:
1. The appeal arose from a judgment allowing the Assessee's claim that 'Welding Electrode' is eligible for CENVAT Credit as a 'Capital Good.'
2. The Assessee argued that 'Welding Electrodes' fall under the category of 'Capital Goods' as specified under Chapter 8311 of Central Excise Tariff, used in repair and maintenance of 'Machines.'
3. The questions raised for decision included the justification of allowing credit on 'Welding Electrodes' used in repair and maintenance, and the Tribunal's decision despite a pending reference to the Hon'ble Chief Justice of India.
4. The dispute period for CENVAT Credit was from 2002-03 to 2006-07, governed by CENVAT Credit Rules, 2002 and 2004, defining 'Capital Goods' exhaustively.
5. The Assessee relied on Rules, 2002 and 2004, arguing that 'Welding Electrodes' are 'components' under the definition of 'Capital Goods.'
6. The exhaustive definition of 'Capital Goods' under the Rules specified items under certain chapters of the Tariff Act, including components, spares, and accessories, used in the factory for final products or providing output service.
7. A similar argument under Rule 57-Q of Rules, 1944 was considered in a previous case by the Court.
8. The Court decided in favor of the Revenue, citing a previous judgment, and quashed the Tribunal's order.
9. The appeal was allowed, and costs were not awarded.

This detailed analysis covers the issues involved in the judgment thoroughly, addressing the legal arguments and decisions made by the Court regarding the eligibility of 'Welding Electrode' for CENVAT Credit as a 'Capital Good.'