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2015 (5) TMI 593 - ALLAHABAD HIGH COURT

2015 (5) TMI 593 - ALLAHABAD HIGH COURT - 2015 (322) E.L.T. 707 (All.) - Denial of MODVAT Credit - Welding electrodes - Held that:- Welding Electrodes" as such have nothing to do with manufacture of 'sugar' and 'molasses' and other products, but, same is used for the purpose of repair and maintenance of machines, worn out during the process of running of factory. If no repair or maintenance is required for certain period, "Welding Electrodes" shall never be used. Thus, for the purpose of manufac .....

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lowed 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 f .....

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gar & Industries Ltd. Vs. Commissioner Customs & Central Excise [2015 (5) TMI 569 - ALLAHABAD HIGH COURT] followed - Decided against assessee. - Central Excise Appeal No. - 39 of 2008 - Dated:- 14-5-2015 - Hon'ble Sudhir Agarwal And Hon'ble Shashi Kant,JJ. For the Appellant : Abhinav N. Trivedi, S. D. Singh For the Respondent : A.S.G.I.,A. K. Singh ORDER (Delivered by Hon'ble Sudhir Agarwal, J.) 1. Heard learned counsel for parties and perused the record. 2. This appeal under Section .....

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and molasses. It also has a chemical division producing chemicals therein. There is further division wherein appellant is manufacturing paper and paper boards. For the period January, 2001 to March, 2001; May, 2001 to June, 2001 and July, 2001 to December, 2001, it claimed MODVAT credit on use of 'Welding Electrodes'. Assistant commissioner, Moradabad issued show cause notice dated 3rd January, 2002 stating that MODVAT credit availed by appellant during aforesaid period was not correct .....

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sfy the definition of 'capital goods' or 'input' to 'capital goods' entitled for MODVAT credit. 5. Assistant Commissioner, rejected exemplar and disallowed MODVAT credit vide order dated 31st December, 2004, raising a demand of ₹ 183672/-, besides imposing penalty of the same amount. It held that "Welding Electrodes" can neither be treated to be 'input' nor "capital goods'. 6. Appellant preferred appeal before Commissioner (Appeals, Centra .....

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aside the same. 8. In the memo of appeal, appellant has framed seven substantial questions of law, but while admitting appeal on 10th April, 2008, this Court framed only one substantial question of law as under : "(1) 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?" 9. In order to clarify the thi .....

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ect in respect to both the questions are same. 11. The period of dispute brings in two different sets of provisions. For the period January to March, 2001 the matter would be governed by Rules 57A and 57B read with Rule 57Q as were substituted by notification dated 01.03.1997 and amended up to 1999, while subsequent period of May, 2001 to December, 2001, the matter would be governed by CENVAT Credit Rules, 2001 (hereinafter referred to as 'Rules, 2001'). It would be appropriate to first .....

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d 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;" 13. 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 all .....

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3.1997. 15. Rules 57A, 57B and 57Q, as came to be inserted by notification dated 01.03.1997 and amended up to February, 1999, read as under : "Rule 57A. Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, by notification in the Official Gazette, specifically in this behalf for the purpose of allowing credit of any duty of excise or the additional duty u .....

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ified in the notification issued under sub-rule (1) and subject to the provisions of this section and the conditions and restrictions, if any, specified in the said notification. (3) The Central Government may also specify in the said notification the goods or classes of goods in respect of which the credit of specified duty may be restricted. (4) The credit of specified duty under this section shall be allowed on inputs used in the manufacture of final products as well as on inputs used in or i .....

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and allow the credit of such declared duty deemed to have been paid in such manner and subject to such conditions as may be specified in the said notification even if the declared inputs are not used directly by the manufacturer of final products declared in the said 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 d .....

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o 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 accompanying the goods, has been paid un .....

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in the factory of production; (ii) paints; (iii) inputs used as fuel; (iv) inputs used for generation of electricity or steam, used for manufacture of final products or for any other purpose, within the factory of production; (v) packing materials and materials from which such packing materials are made provided the cost of such packing materials is included in the value of the final product; (vi) accessories of the final product cleared alongwith such final product, the value of which is includ .....

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as component parts in the manufacture of final products), used for any purpose in the factory; (ii) packing materials in respect of which any exemption to the extent of the duty of excise payable on the cost of the packing materials is being availed of for packing any final products; (iii) packing materials or containers, the cost of which is not included in the value of the final products under section 4 of the Act; and (iv) crates and glass bottles used for aerated water." "RULE 57Q .....

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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, manufac .....

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84.08 and of a kind used in motor vehicles, compressors falling under heading No. 84.14 and of a kind used in refrigerating and airconditioning appliances and machinery, heading or sub-heading Nos. 84.15, 85.18, 8422.10, [8424.10, fire extinguishers falling under sub-heading No. 8424.80, 8424.91, 8424.99], 84.29 to 84.37, 84.40, 84.50, 84.52, 84.69 to 84.73, 84.76, 84.78, expansion valves and solenoid valves falling under sub heading No. 8481.10 of a kind used for referigerating and aircondition .....

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tories and refractory materials; 8 Tubes and pipes and fittings thereof, used in the factory; 9 Pollution control equipment; 10 Grinding wheels and the like goods falling under sub-heading No. 6801.10; 11 Goods falling under heading No. 68.02; and 12 Lubricating oils, greases, cutting oils and coolants. (2)(i) The manufacturer of the final products shall be allowed credit of the duty of excise or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) (hereinaft .....

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edule to the said Customs Tariff Act, to the extent of 75% of the said additional duty paid on such goods. (4) A manufacturer of the final products purchasing capital goods from a unit situated in a Free Trade Zone or from a hundred per cent export-oriented undertaking or from a unit in an Electronic Hardware Technology Park or Software Technology 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 t .....

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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 ar .....

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as provided in rule 57S." (emphasis added) 16. First we would consider the question whether 'Welding Electrodes' can be considered to be 'input', attracting MODVAT credit under Rule 57A and 57B of Rules, 1944. 17. It is admitted case of appellant that "Welding Electrodes" as such have nothing to do with manufacture of 'sugar' and 'molasses' and other products, but, same is used for the purpose of repair and maintenance of machines, worn out during t .....

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be necessary. 18. The term used in Rule 57A and 57B i.e. 'input' means, as used in or in relation to manufacture of final products. This user, in or in relation to, may be direct or indirect. It may not be necessarily used in final production which contains such 'input', but it could be used in or in relation to manufacture of final products. Despite our repeated query learned counsel appearing for appellant could not explain as to how "Welding Electrodes" can be said t .....

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y thing would come within the ambit of Rule 57A and 57B. 19. 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 access .....

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'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. 21. Similarly, whether it can be treated to be 'capital goods' during the relevant period under Rule 57Q, we find that this aspect as already been considered in Central Excise Appeal No. 135 of 2005 - M/s Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise (decided on 25.02.2012). This Cou .....

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alling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act; (ii) components, spares and accessories of the goods specified at (i) above; (iii) moulds and dies; (iv) refractories and refractory materials; (v) tubes and pipes and fittings thereof; (vi) pollution control equipment; and (vii) storage tank, used in the factory of the manufacturer of the final products, but does not include any equipment or applian .....

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