2017 (1) TMI 974 - 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. Whether tribunal suffers from substance, learned counsel keeping in view the fact It is extremely non speaking? - Held that - Tribunal has followed another judgment dealing with similar question decided by Karnataka High Court in Commissioner of Central Excise and Service Tax, LTU. vs. ABB Ltd., 2011 (3) TMI 248 - KARNATAKA HIGH COURT and it is not shown to this Court that said judgment of Karnataka High Court does not cover dispute in this appeal, therefore, order of Tribunal cannot be said to be bad for want of reasons since reasons contained in the judgment followed by Tribunal would form part of order of Tribunal also - decided against Revenue. Appeal allowed - decided partly in favor of assessee and partly in favor of Revenue.

Summary

Issues:
1. Whether 'Welding Electrode' is eligible for CENVAT Credit under the Central Excise Tax Act, 1944?
2. Whether 'Welding Electrode' falls under the category of 'Capital Goods' as claimed by the Assessee?

Analysis:

Issue 1:
The appeal arose from a judgment allowing the Assessee's claim that 'Welding Electrode' is eligible for CENVAT Credit. The appellant argued that 'Welding Electrodes' do not qualify as 'Capital Goods' under Rule 57-Q of the Central Excise Rules, 1944. The main question was whether the Tribunal's decision lacked substance and was non-speaking. The Tribunal's reliance on a judgment by the Karnataka High Court was deemed valid, and the first question was answered against the Revenue.

Issue 2:
The Assessee claimed that 'Welding Electrodes' should be considered 'Capital Goods' under Rule 2(b)(iii) of the CENVAT Credit Rules, 2002 and Rule 2(a)(A)(iii) of the CENVAT Credit Rules, 2004. The exhaustive definition of 'Capital Goods' specified in the rules includes specific categories such as pollution control equipment, moulds, dies, refractories, and storage tanks used in manufacturing. The Assessee argued that 'Welding Electrodes' should be considered 'components' falling within the definition of 'Capital Goods'. However, the Court found that 'Welding Electrodes' did not meet the criteria for 'Capital Goods' as defined in the rules. The Court referenced a previous judgment to support this decision, ultimately ruling in favor of the Revenue and quashing the Tribunal's order.

In conclusion, the Court allowed the appeal, quashed the Tribunal's order, and made no order as to costs.