9911796707
TMI Blog2008 (5) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... des. In both the impugned orders, it has been held that assessees are entitled to take Cenvat credit on Welding Electrodes as 'input'. Briefly stated the grounds of appeals of the revenue are as follows: (i) The Larger Bench in the case of Jaypee Rewa Plant v. CCE 2003 (159) ELT 553 (Trib.-Delhi) has held that welding electrodes used for repairs and maintenance of plants and machinery and not used co-extensively with the process of manufacture of final products and not integrally connected with the manufacture, therefore it cannot be considered to have been used in the manufacture of final products. Further, the following case laws in support of revenue's contentions have been relied on (a) Kanoria Sugar & Gen. Mfg. Co. Ltd v. CCE -1996 (87) ELT 522 (Trib.-New Delhi). (b) Century Cements v. CCE -1997 (98) ELT 69 (Trib.-New Delhi). (c) K. L. Rathi Steels Ltd. v. CCE -2000 (121) ELT 843 (Trib.-New Delhi). (ii) The welding electrodes were used for repair and maintenance of the machinery/capital goods. Hence, they are not inputs. This point was not discussed by Commissioner (Appeals), Hyderabad. (iii) The Commissioner (Appeals), Hyderabad has opined that welding electrodes could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypee Rewa Plant (supra) also of the Larger Bench was not the correct law and have disagreed with the findings recorded therein and held that the credit on Electrodes; Acetylene Gas, Oxygen Gas etc. is eligible as these inputs were used in or in relation to the manufacture of final product directly or indirectly. 5.5 The Tribunal in the case of Prism Cement (sic) disallowed the credit on Electrodes based on the Larger Bench decision in the case of Jaypee Rewa Plant (supra). The appeal filed by M/s. Prism Cement has been admitted and it has been held that following questions of law arise for consideration: (A) Whether the Appellate Tribunal was correct in disallowing Cenvat Credit of duty paid on 'Oxygen' and 'Dissolved Acetylene Gas' essentially used along with Welding Electrodes in terms of rule 2 of Cenvat Credit Rules, 2002? (B) Whether the Appellate Tribunal was correct in disallowing Cenvat Credit of duty paid on Oxygen and 'DA Gas' used with Welding Electrodes when the definition of INPUT as defined in rule 2(g) of Cenvat Credit Rules, 2002 is wide enough? (C) Whether 'Oxygen' and 'D.A. Gas' ceased to be INPUT if they are used with Welding Electrodes for welding purpose an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of India Sugars & Refineries Ltd. (supra). In the case of Neer Shri cement Ltd. (supra), the Hon'ble High Court of Rajasthan has held that-the credit on Electrodes is eligible. 5.8 In view of the above facts and the number of citations the credit availed on electrodes was proper and legal. The appellant has relied upon only few decisions which were given in different context. 6. Shri B. Kamala Vishnu, learned Consultant made the following submissions: (i) The expression used in the definition of inputs 'goods used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final products or not" has a very wide ambit. (ii) In the case at issue, the welding electrodes are used for depositing metal on the metal rolls for narrowing the grooves which get widened time and again due to continuous rolling. Therefore, they are used in a process which is integrally connected with the process of manufacture of final products. Hence, welding electrodes are 'inputs' and Cenvat Credit is admissible on them. (iii) In the Triveni Engg. Industries 'case (supra) referred by the revenue, there was a query from the Bench whether welding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant warrant any interference with the impugned order of the Commissioner (Appeals), which has rightly followed the decision of the Larger Bench in Jaypee Rewa Plant (supra), in disallowing the Cenvat credit to the appellants in respect of use of oxygen gas and acetylene gas. Both the appeals are, therefore, dismissed." 8. I have gone through the records of the case carefully. The main issue to be decided is whether the "Welding Electrodes" which are used for maintenance and repair of machineries in the cement plant and also in the rolling mill are entitled for Cenvat credit as 'input'. Both the lower authorities have held that the said welding electrodes are entitled for the Cenvat credit. However, revenue has come in appeal against the said decisions on various grounds relying upon various decisions. During the course of hearing several decisions were referred to by both sides. In order to appreciate the various issues raised, a very detailed finding is necessary. 8.1 Before dwelling on the various contentions, let me briefly summarize the findings of the lower appellate authorities. The Commissioner (Appeals), Mangalore in Order-in-Appeal No.119/2007-CE, dated 14-3-2007 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat Credit Rules, 2004 inasmuch as Welding Electrodes could be placed in the category of components or spares or accessories of the capital goods specified under rule 57AA(a)(i)/rule 2B(i) and rule 2(a)(i) of the aforesaid Rules. Further, the case had already been settled in the appellant's favour in the past and no new additional grounds or changes in law have been there which could have justified the reopening of the settled issue." 8.3 It can be seen that both the authorities have mainly considered the meaning of 'input' as given in the relevant Cenvat Credit Rules. They have arrived at their conclusions based on the definition of the word 'input' in Cenvat Credit Rules. 8.4 The Cenvat Credit scheme was originally known as Modvat Credit Scheme. It was actually introduced in the year 1986 to avoid the cascading effect of tax on the 'inputs' used in or in relation to the manufacture of final products. At a later date, the term 'Modvat' was dispensed with in preference to the term 'Cenvat'. Whatever be the name, essentially the Modvat credit and the Cenvat scheme are one and the same. This has been categorically held by the Hon'ble Apex Court in the case of Vikram Cement v. CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, mentioned in the Rule. Further, even from the very definition of 'input', it is clear that the scope of the term is very wide to cover even the goods which are used indirectly in or in relation to the manufacture of final products. It is not necessary that the 'input' should be contained in the final product. This is also clear from the above definition. Even goods used as paint or packing materials or fuel for generation of electricity or steam used in or in relation to manufacture of final products are entitled for the Cenvat credit. 8.6 Coming to Welding Electrodes used in repair and maintenance of machineries in the cement factory, I am of the view that the cement factory consisting of complex machineries cannot run smoothly if the various defects are not rectified immediately. There are large number of pipes and tubes through which the various ingredients pass through. If some parts of the pipes or even machinery are broken, welding is very necessary. How can anybody reason that such welding is not in relation to the manufacture of final products? 8.7 The learned SDR brought to my notice where the Single Member Bench in the case of J. K. Cement Works (supra) had hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The sole ground for holding welding electrodes not to be capital goods is that welding electrodes used to repair or maintenance of the capital goods is that the repair and maintenance of plant is not done when the machinery is in operation, and such electrodes therefore cannot be considered to have been used in relation to the manufacture of the final product. Clause (b) of rule 57AA of the rules as it stood at the relevant time defined "inputs" to be all goods except high speed diesel and motor spirit used in or in relation to the manufacture of the final products, whether directly or indirectly, including various specified items such as accessories. The rule therefore included inputs to mean goods used directly or indirectly used in relation to the manufacture of the final product. Now it cannot be denied that without use of welding electrodes, the plant for maintenance of which they were used would cease to function after sometime and therefore would not be able to produce the final product. By extending the life of the plant, and preventing its breakdown, the welding electrodes were, though not directly used in relation to the manufacture of final product, were certainly in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 2001. The said decision disagreed with the decision of the Larger Bench of the Tribunal in the case of CCE v. Oripol Industries 2003 (155) ELT 278 (Trib.-New Delhi). Even while disagreeing with the Larger Bench, reliance was placed on the decision of the Apex Court in the case of Union of India v. Umesh Dhaimode1998 (98) ELT 584. It was clearly held that Supreme Court's decision is binding on the Tribunal and is to be preferred to the contrary decision of Tribunal's Larger Bench decision in the case of Oripol Industries (supra). Revenue challenged the decision of the Single Member Bench in the High Court of Gujarat in the case of CCE v. Medico Labs. 2004 (173) ELT 117. 8.10 The observations of the Gujarat High Court in the case of Medico Labs. (supra) wherein it had upheld the Single Member Bench's decision is worthy of pondering over. The observations of the Hon'ble High Court of Gujarat are reproduced hereinbelow: "11. With utmost respect to the Larger Bench of the Appellate Tribunal, it had not considered the later judgment of the Hon'ble Supreme Court in case of Union of India v. Umesh Dhaimode 1998 (98) ELT 584. Relying on this decision of Umesh Dhaimode (supra) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Larger Bench decision in the case of Modi Rubber Ltd. (supra) and also decision of the Punj. & Har. High Court in the case of CCE v. National Fertilizers Ltd. (supra) while coming to the conclusion that welding electrodes are entitled for Cenvat Credit. The Punjab and Haryana High Court's decision is definitely preferable to the Larger Bench decision in consonance with judicial discipline. In Para 5 of the India Sugars & Refineries Ltd c case (supra), it has been clearly shown that the Larger Bench in the Jaypee Rewa Plant's case (supra) has ignored the decision of the Punjab & Haryana High Court and also the Supreme Court judgments referred therein. In the light of the above, it is felt that the Divisional Bench in the case of India Sugars & Refineries Ltd (supra) does not appear to have committed any judicial indiscipline in following Punjab & Haryana High Court's decision. 8.12 Coming to the decision of the Larger Bench in the case of Jaypee Rewa Plant (supra), I find that the Bench has decided the issue based on the interpretation of the expression "in the manufacture of goods" [occurring in section 8(b) of the Central Sales Tax Act, 1956] by Apex Court. I have already stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinbelow. The India Sugars & Refineries Ltd.'s case (supra) of the Division Bench has relied on this decision: "15. We may also refer to the decision of High Court of Madras in Ponds (India) Ltd. v. Collector of Central Excise 1993 (63) ELT 3. The appellant, manufacturer of cosmetics, used duty paid plastic granules to manufacture plastic containers and used the same as containers for the excisable final product, namely, cosmetics. The Court held that the cosmetic items are not marketable unless packed in containers which have to be treated as component part of the final product and that wider connotation should be given to the words "goods used in or in relation to the manufacture' of final product. Plastic granules would be component parts of the final product. The Court also relied on some of the chapter notes. 16. Under rule 57A, inputs are not only goods used in the manufacture of final products, but also goods used in relation to the manufacture of final products. The same language is used in exclusion [clause] (i) of the Explanation to the Rule. The words "goods... used by him (dealer) in the manufacture or processing of goods" occurring in section 8(3) (b) of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
