TMI Blog2009 (7) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... deration of facts means SLP rejected by passing speaking order – Since in the adjudication order limitation aspect was not considered in the manner in which it ought to be considered, matter remanded to original authority to consider limitation – Regarding definition of “input”, Court or Tribunal are not empowered to expand meaning of term under the guise of interpretation when the same defined by legislature - As far as penalty aspect is concerned the same will have to be considered alongwith the issue of bar of limitation. - E/1466/2009 - 603/2009-EX(PB) - Dated:- 24-7-2009 - Justice R.M.S. Khandeparkar, President and Shri M. Veeraiyan, Member (T) REPRESENTED BY : Shri Shri Ravi Raghavan, Advocate, for the Appellant. S/Shri B.K. Singh, Jt. CDR and P.K. Singh, DR, for the Respondent. [Order per : Justice R.M.S. Khandeparkar, President (Oral)]. - Heard at length the learned Advocate for the appellants and learned Jt. CDR for the respondent. 2. The appellants challenge the order dated 18-3-2009 passed by the Commissioner (Appeals), Indore as well as the order dated 4-11-2008. The Joint Commissioner had disallowed the Cenvat credit amounting to Rs. 38,43,039/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, the appellants cannot claim Cenvat credit in respect of the duty paid on the products utilized for maintenance and repairs. 5. Learned Advocate appearing for the appellants while assailing the impugned order submitted that the law on the point in issue already stands concluded by the decision in the matter arising between the appellants and the respondents in relation to the case pertaining to Vikram Cement as also by the decision of the Hon'ble Rajasthan High Court in Hindustan Zinc Ltd., case. In that respect, attention was drawn to the decisions in the matter of Vikram Cement v. CCE reported in 2005 (187) E.L.T. 145 (S.C.), Vikram Cement v. CCE reported in 2006 (194) E.L.T. 3 (S.C.), Vikram Cement v. CCE reported in 2006 (197) E.L.T. 145 (S.C.) and Hindustan Zinc Ltd. v. Union of India reported in 2008 (228) E.L.T. 517 (Raj.). He further submitted that the law as explained by the Hon'ble Rajasthan High Court has been followed by the Tribunal in General Manager, Oswal Overseas Ltd., v. CCE, Meerut reported in 2009 (240) E.L.T. 544 (Tribunal) = 2009 (91) RLT 577 (CESTAT-Del.), CCE, Meerut-II v. Bilaspur Kisan Sahkari Chinni Mills Ltd., reported in 2009 (167) ECR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Apex Court in the matter of Kunhayammed v. State of Kerala reported in 2001 (129) E.L.T. 11 (S.C.). 6. Learned Jt. CDR on the other hand, submitted that both the authorities below after taking into consideration the facts of the case has correctly ruled that the welding electrodes used in the repairs and maintenance of the machines would not be inputs used in the process of manufacture of the final product. Drawing our attention to the expression "capital goods" and "input" as is found in Cenvat Credit Rules, 2004, learned Jt. CDR submitted that the same are in para materia with those found in Cenvat Credit Rules of 2002 in respect of the similar expressions. He further submitted that the expression "capital goods" as is found in Rule 2(a)(A)(i) and (iii) would disclose that as far as the capital goods are concerned which can be subjected to availing Cenvat credit, the same do not include the materials used for repairs of the capital goods or other parts. Further, with reference to the expression "inputs" as is found in Rule 2(a) of the said rules, he submitted that it clearly discloses that the inputs must be used in the process of manufacture of the final product. Givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to manufacture of the final products. He also submitted that the activity of the repairs and maintenance by itself does not generate either the final product or any part thereof. According to learned Jt. CDR the activity of repairs and maintenance does not form part of the process of manufacture of the final product. 8. Learned Advocate for the appellants also assails the impugned orders on the ground that the authorities could not have invoked extended period of limitation in the facts and circumstances of the case. According to the learned Advocate, the records clearly reveal that the Department was fully aware of the fact that the appellants had been availing Cenvat credit in relation to the duty paid on the welding electrodes used in repairs and maintenance of the machinery all along from 2003 onwards, yet they chose to remain silent till March 2008 on which date show cause notice came to be issued. Being so, the claim prior to April 2007 was clearly barred by limitation as disclosed in Section 11AC of the said Act. In that regard, attention was sought to be drawn to para 13 of the reply filed by the appellants with reference to the show cause notice issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, would not be entitled to claim benefits under the exemption Notification No. 67/95, dated 16-3-95. When the matter was carried in appeal before the Apex Court, at the stage of SLPs the same came to be dismissed [2008 (229) E.L.T. A127 (S.C.)] with the following order :- "'Delay condoned. On the facts of this case, matters stand dismissed". 12. With reference to the above order passed by the Apex Court, it is sought to be contended on behalf of the appellants that the same is a non-speaking order rejecting the SLP and therefore, there is no question of merger of the order passed by the Tribunal in the order of the Apex Court nor it lays down the law in terms of Article 141 of the Constitution and therefore, there is no binding precedent pursuant to the said order. It is also their contention that there is a direct judgment on the issue involved in the matter delivered by the Hon'ble Rajasthan High Court in Hindustan Zinc Limited (supra) therefore, the judgment of the Larger Bench impliedly stands overruled and the judgment of the High Court will stand binding upon the Tribunal. In that regard reliance is placed in Kunhayammed case of the Apex Court. 13. The Apex Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Supreme Court. 15. As regards the powers of the High Courts or the Tribunals to deal with their orders which are subjected to judicial review before the Apex Court, it was held that in case of such orders, if the SLP itself is dismissed by non-speaking order, then in that case, the provisions of Article 141 of the Constitution would not be attracted. It was specifically ruled that "Whatever be the phraseology employed in the order of dismissal, if it is a non-speaking order, i.e. it does not assign reasons for dismissing the special leave petition, it would neither attract the doctrine of merger so as to stand substituted in place of the order put in issue before it nor would it be a declaration of law by the Supreme Court under Article 141 of the Constitution for there is no law which has been declared. If the order of dismissal be supported by reasons then also the doctrine of merger would not be attracted because the jurisdiction exercised was not an appellate jurisdiction but merely a discretionary jurisdiction refusing to grant leave to appeal". Having ruled so, it was also clarified by the Apex Court that "Still the reasons stated by the Court would attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then reversing the earlier orders was an affront to the order of the Apex Court". 19. In Dhanwanti Devi case while dealing with the law of precedent and the principle of ratio decidendi, it was held that - "It is not everything said by a Judge while giving judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates- (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment". It was further held that- "The conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected the SLP on consideration of the facts of the case it would mean that SLP was rejected by passing a speaking order. The Court subordinate to the Supreme Court are bound by such order, more particularly, bearing in mind the principle of judicial discipline. As was observed by the Apex Court that "the order of the Supreme Court would mean that it has declared the law and in that light the case was considered not fit for grant of leave". The order passed by the Apex Court while dismissing the SLP in K. Santhakumaran case has to be understood bearing in mind the law laid-down in the above referred decisions and having so understood, it cannot be said that the view taken by the Tribunal in the Larger Bench in the matter of Jaypee Rewa Plant case has not been approved by the Apex Court and, therefore, the same cannot be ignored by the Tribunal, rather it is binding. 21. Coming to the decision of the Hon'ble Rajasthan High Court decision in Hindustan Zinc Limited that was an appeal under Section 35G of the said Act wherein the substantial question of law for consideration was as under- "Whether welding electrodes used for repairs and maintenance of plant and machinery are eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be 'Capital goods', and, therefore, qualify for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be 'Capital goods' and qualify for Modvat credit entitlement. Clause (e) makes moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the explanation is very liberal". 23. The Apex Court further held that "it was not the case of the Revenue at any stage before the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry on the manufacturing process. Thus, with the above, if the quoted part of the judgment in J.K. Cotton's case is read, it becomes clear, that the expression "in the manufacture of goods" should normally encompass entire process carried on by the dealer, of converting raw materials into finished goods, where any particular process, or activity, is so integrally connected with the ultimate production of the goods, but for that process, manufacturing, or processing of the goods would be commercially inexpedient, goods required in that process would, fall within expression "in the manufacturing of goods. In our view the proposition propounded above sets the controversy at rest. The question, as framed, is accordingly required to be answered in favour of the assessee". 27. If one reads the judgment of the Hon'ble Rajasthan High Court, therefore, it would be clear that the High Court has held that the substantial question of law which was sought to be raised before the matter was already answered by the decision of the Apex Court in J.K. Cotton's case and, therefore, the High Court was not inclined to accept the reason given in Jaypee Rewa Plant case. Obviously the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not integrally connected with the process of the manufacture and which does not results in utilization of such product directly or indirectly into the manufacture of the finished product, then such a product cannot be said to be the input utilized for or in relation to manufacture of the final product. This is also evident from the definition of the term input as found in Rule 2(k). The definition clearly uses the word "used" and further clarity the same with the expression "in or in relation to" and further uses these expressions with reference to the term "manufacture of final products". The definition disclosing the expression like "used", "in or in relation to", "the manufacture of final products" would inevitably disclose, that the same refer to only those products which are used in or integrally connected with the process of actual manufacture of the final product and only such product could be entitled to be classified as the input in or in relation to the manufacture of final products, and not otherwise. When the legislature in its wisdom has specifically defined a term, no Court or Tribunal under the guise of interpretation thereof is empowered to expand the meaning of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the maintenance or repairs would be absolutely necessary. But, the same cannot be said to be integrally related to the process of the manufacture of final product. The process of manufacture is different from the maintenance and repairs of the machinery to keep it in a running condition. 31. In Impression Prints case the claim of the assessee was for the benefit under Notification No. 65/87-C.E., dated 1-3-1987. Attention was drawn to para 16 of the decision which refers to earlier decision in the matter of CCE. Jaipur v. Rajasthan State Chemical Works, Deedwana reported in 1991 (55) E.L.T. 444 (S.C.) = 1991 (4) SCC 473 wherein the question was whether the pumping and lifting with the aid of power constituted process in or in relation to manufacture. While dealing with the said issue, the Apex Court held that "any activity or operation which is the essential requirement and is so related to the further operations for the end result would be a process in or in relation to manufacture to attract the relevant clause in the exemption notification". At the outset, it is to be noted that the observations were essentially with reference to the scope of the exemption notification. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture or not in order to avail the benefit of the notification under which the exemption was sought to be availed. The Department had denied the benefit on the ground that there was use of power in the process of manufacture. It was sought to be contended in that case before the Apex Court that the use of power was only in certain ancillary and incidental areas such as mixing of chemicals and, therefore, the benefit could not be denied. Referring to the earlier decisions in the matter of J.K. Cotton Spinning and Weaving Mills co. Ltd., case and further referring to the factual aspect of the case it was held that factually the stand that there was no use of power was unsustainable. Apparently, as far as the power was utilized in the process of manufacture or not, so as to avail the benefit of the concern notification was decided on the basis of the facts of the particular case. 34. In Solaris Chemitech Limited [2007 (214) E.L.T. 481 (S.C.)] case, the issue was whether the assessee was entitled to Modvat credit under Rule 57A on Low Sulphur Heavy Stock and furnace oil was used for generating electricity captively consumed for manufacture of final products such as caustic soda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before the process of lamination, the defect is noted, then it cannot be said that the process of manufacturing did not commence. That was in a totally different set of facts. The Hon'ble Delhi High Court had ruled that if a sheet is rejected or the piece of sheet is rejected, it does not mean that the sheet was never used in the manufacture of safety glass, and, therefore, the claim could not have been denied on the said ground. 37. In Singh Alloys Steel Limited case, the Hon'ble Calcutta High Court was dealing with a question as to whether dolopatch mix, magnesite peas and ramming mass is an input of steel ingots within the meaning of the said expression under Rule 57A of the Central Excise Rules, 1944. It was observed that those items lose their identity and are consumed in the process of manufacture though some part of the items remain in the liquid metal which form the ingot and the balance form part of the residue or slug. It was further observed that the ingots could be manufactured in the furnace without those items but there was then a possibility of the furnace being damaged and it could result in loss of productivity. At the same time, it was also noted that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decide the issue in the matter in hand and are clearly distinguishable. 40. For the reasons stated above, we do not find the decision by the Hon'ble Single Members in General Manager Oswal Overseas Ltd., Bilaspur Kisan Sahakari Chinni Mills Ltd., and Hindustan Zinc Limited to be laying down the correct law. 41. For the reasons stated above, therefore, we are of the considered opinion that the welding electrodes used for repair and maintenance of the machinery cannot form the inputs within the meaning of said expression under Cenvat Credit Rules, 2002 and 2004 for the purpose of claim of Cenvat Credit under the said rules as the said products arc not used or utilized in the process of manufacture of the final product or in relation to the manufacture of the final product. Hence, we do not find any reason for interference in finding arrived at by the authorities below denying the Cenvat credit to the appellant in relation to the duties paid on the welding electrodes stated to have been used for the repairs and maintenance of the machinery. 42. The appellants also have raised the issue of bar of limitation in the sense that in the facts and circumstances of the case, the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt itself. Thus the presence of all the above decisions in our favour alongwith the legal position lead us to a bona fide belief that the credit on welding electrodes was available to us and we are not contravening any provision of law by taking and utilizing the aforesaid credit. Further the taking of such credit was disclosed in returns filed by us with the department. Further the taking of such disputed period our records were audited by the AGMP and various Departmental Audits and no objection was raised on this point. We were never questioned about the taking of such credit except the present proceedings initiated by the department. Thus it cannot be said that we have suppressed the information of taking of such credit with an intent to evade payment of duty. It is submitted that charge of suppression can be made out only when there is corresponding duty to disclose. In the present case there was no obligation on our part to divulge out information which as per our belief was already known to the department. It is submitted that mens rea is an essential element for imposition of penalty under Section 11AC of the Act". 44. While dealing with the issue of limitation the adju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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