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TMI Blog2015 (2) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... Triveni Engineering and Industries Ltd. Vs. C.C.E. 2005 (186) ELT 158 and Jaypee Rewa Plant Vs. C.C.E. 2003 (159) ELT 553. 3. This Court when admitting the appeal on 2.5.2008 formulated following substantial question of law: (i) "Whether the authorities were justified in disallowing Modvat Credit on welding electrodes used for the maintenance and repair of the machinery in the factory wherein the appellants are engaged in the manufacture of V.P. Sugar and Molasses? 4. When the matter was taken up before this Court for hearing, learned counsels for parties fairly stated that in order to make issue more specific, it may be appropriate to formulate one more substantial question of law which we formulate as under and counsels for parties addressed the Court on both these substantial questions of law: (ii) "Whether 'welding electrodes' can be treated to be eligible 'inputs' under Rule 57A/B or 'capital goods' under Rule 57Q, to claim MODVAT credit? " 5. The disputes relates for admissibility of MODVAT credit on use of "welding Electrodes" during the period of October' 1999 to March' 2000 and January' 2002 to March' 2002. 6. The appellant-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a w.e.f. 01.03.1986. Section 37 of Act, 1944 was modified and Clause (xiva) was inserted by Section 51 Act 23 of 1986 w.e.f. 1st March, 1986 and Clause (xvib) was inserted by Section 96 of Act 11 of 1987 w.e.f. 12th May, 1987. These clauses read as under : "(xvia) provide for the credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods; (xvib) provide for the giving of credit of sums of money with respect to raw materials used in the manufacture of excisable goods;" 12. The scheme was introduced by inserting Chapter AA containing Rules 57A to 57J. Initially MODVAT scheme was introduced with a view to avail credit on duty paid on excisable goods used as 'input' in manufacture of final products. From 1st March, 1987, similar scheme for allowing credit of money in respect of certain raw materials used in manufacture of certain excisable goods was introduced and Chapter AAA having Rules 57K to 57P was inserted. Scheme was further enlarged by inserting Chapter AAAA with Rules 57Q to 57U w.e.f. 01.03.1994 so as to permit availment of credit on duty paid on 'capital goods' which are used in manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification, but are contained in the said final products. Explanation. - For the purposes of the sub-rule, it is clarified that even if the declared inputs are used directly by a manufacturer of final products, the credit of the declared duty shall, notwithstanding the actual amount of duty paid on such declared inputs, be deemed to be equivalent to the amount specified in the said notification and the credit of the declared duty shall be allowed to such manufacturer. (6) Notwithstanding anything contained in sub-rule (1), the Central Government may, by notification in the Official Gazette, declare the inputs on which the duty of excise paid under section 3A of the Central Excise Act, 1944 (1 of 1944), shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification, and allow the credit of such duty in respect of the said inputs at such rate or such amount and subject to such conditions as may be specified in the said notification: Provided that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty of excise as indicated in the documents acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory of the manufacturer of final products. TABLE S. No. Description of capital goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer Description of final products 1 2 3 1 All goods falling under heading Nos. 82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely:-(i) all goods falling under Chapter 24; and (ii) all goods falling under heading Nos. 36.05 or 37.06. [(iii) ingots and billets of non-alloy steel falling under sub heading Nos. 7206.90 and 7207.90, manufactured in an induction furnace unit, whether or not any other goods are produced in such induction furnace, and hot re-rolled products of non-alloy steel falling under sub-heading Nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 on which duty is paid under Section 3A of the Central Excise Act, 1944 (1 of 1944).] 2 All goods falling under Chapter 84 (other than internal combustion engines falling under heading No. 84.07 or 84.08 and of a kind used in motor vehicles, compressors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnology Parks and using them in the manufacture of final products, shall be allowed to take the credit of the specified duty paid on such capital goods only to the extent of duty which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 (51 of 1975), equivalent to the duty of excise paid on such capital goods. (5) The credit of the specified duty on capital goods (other than those capital goods in respect of which credit of duty was allowable under any other rule or notification prior to the 1st day of March, 1997) shall not be allowed if such capital goods were received in the factory before the 1st day of March, 1997. (6) A manufacturer shall be allowed credit of specified duty paid on capital goods manufactured by him for the manufacture of final products in his factory. (7) The credit of the specified duty on capital goods [other than those capital goods covered under S. Nos. 5, 7, 10, 11 and 12 of column (2) of the Table below sub-rule (1)] and received in the factory on or after the 1st day of January, 1996, shall not be taken on a date prior to the date on which such capital goods are installed or, as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd even nut bolts etc. every thing would come within the ambit of Rule 57A and 57B. 18. In our view, it can be safely said that under Rules 57A and 57B, there is no term within which 'Welding Electrodes', as such, may fall. Our attention was drawn to Rule 57B(1)(iv), where MODVAT credit has been allowed to 'inputs' used for manufacture of final products or for any other purpose within the factory of production. Similarly, our attention was also drawn to Rule 57B(1)(vi) which allowed MODVAT credit on accessories on final products cleared alongwith such final products, value of which is included in the assessable value of final products. Learned counsel for appellant could not explain as to how 'Welding Electrodes' can be said to be used for manufacture of final products or accessories of final products, so as to bring within aforesaid provisions. 19. Looking to aforesaid provisions as applicable at the relevant time which is in dispute in the present appeal, we are clearly of the view that 'Welding Electrodes' would not come within the category 'inputs' so as to qualify for MODVAT credit under Rule 57A read with Rule 57B of Rules, 1944. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 2002, the "capital goods" and "input" were defined in Rules 2(b) and (g) and read as under: "(b) "capital goods" means:- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.05 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act; (ii) pollution control equipment (iii) components, spares and accessories of the goods specified at (i) and (ii) above; (iv) moulds and dies; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank, used in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office;" "(g) "input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils and coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of f ..... 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