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TMI Blog2023 (12) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... of SLP(C) NO.37978 OF 2016) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.2358 OF 2017) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO. OF 2023 Arising out of C.C. NO.1960 OF 2017) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.27610 OF 2017) CIVIL APPEAL NO.18006 OF 2017 CIVIL APPEAL NO.18008 OF 2017 CIVIL APPEAL NO.18005 OF 2017 CIVIL APPEAL NO.18007 OF 2017 CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9053 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9062 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.8918 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9077 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9040 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9001 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9000 OF 2020) JUDGMENT Delay condoned. Leave granted in Special Leave Petitions. 2. The question arising in this batch of civil appeals is identical i.e., whether products viz. welding electrodes, paint, varnish, MS plates, jointing sheets etc. used within the factory of the assessees for repair, maintenance, fabri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odes, Formatic Flux/Welding Alloys, Welding Wires, Welding Flux, etc. Used for joining pipes and also for fabrication of structures. November 1996 to January 1997 Central Excise Rules, 1944 06 C.A. No. 6133 of 2012 M/s Steel Authority of India Vs. Commissioner of Central Excise, Jharkhand Paints and varnishes Used for protective painting of structures. Used in cold rolling mill/hot roll coil finishing mill. May 1996 Central Excise Rules, 1944 Welding electrodes Posithermo, thermocouple Used for welding purposes to manufacture various parts & components which were captively used for repair and maintenance of machineries. Credit denied for the reason of improper/duplicate documents for taking credit 07 C.A. No. 6135 of 2012 M/s Steel Authority of India Vs. Commissioner of Central Excise, Jharkhand Lubricating oil Used to lubricate the mill equipment installed in the factory. June 1996 Central Excise Rules, 1944 Welding electrodes Used for welding purpose to manufacture various parts & components which were captively used for repair and maintenance of machineries. 08 C.A. No. 6125 of 2012 M/s Hindustan Zinc Ltd. Vs. Commissioner of Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2006 to October 2006, November, 2006 to March, 2007 Cenvat Credit Rules, 2004 read with the Central Excise Act, 1944 16 C.A. No. 10824 of 2010 M/s Madras Cements Ltd. Vs. Commissioner of Central Excise Madurai Welding electrodes, Used for manufacture of final products, as inputs and capital goods. April, 2005 to April, 2006 Cenvat Credit Rules, 2004 17 SLP (C) No.25833 of 2015 M/s Dhampur Sugar Mills Ltd Vs. Commissioner of Central Excise, Meerut Welding electrodes Used for maintenance and repair of the machineries, as capital goods and inputs. May, 2001 to June, 2001. Cenvat Credit Rules, 2001; Central Excise Act and Rules, 1944 18 C.A. Nos. 202- 204 of 2016 M/s Monnet Sugar Ltd. Vs. Commissioner, Customs and Central Excise, Meerut - I Welding electrodes, Drimax, Magna Flock, Ranocide, DP/LDP Liner, etc. Used for maintenance and repair of the machinery. July, 2004 to December, 2004; January, 2005 to March, 2006; April, 2006 to November, 2006, Cenvat Credit Rules, 2004; 19 SLP(C) No. 549 of 2016 M/s Kesar Enterprises Ltd. Vs. Commissioner, Customs and Central Excise, Meerut Asbestos, joining sheets, welding electrodes, plates, mills plates, S.S. pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar. February, 2000 to March, 2000; and March, 2007 to September , 2007 Cenvat Credit Rules, 2004 27 C.A. No.18006 of 2017 M/s Manikgarh Cement Vs. The Commissioner of Customs and Central Excise Welding electrodes, welding wire and sweet on paste Used for the repair and maintenance of capital goods. July, 2001 to December, 2001. Cenvat Credit Rules, 2001 28 C.A. No.18008 of 2017 M/s Manikgarh Cement Vs. Commissioner of Central Excise Welding electrodes, welding wire and sweet on paste Used for repairing and maintenance of capital goods (for rebuilding, refurbishing at the table liners/tyres, rollers, etc. of the raw mill, coal mill, cement mills and kiln in its cement plant). September and October, 2005 Cenvat Credit Rules, 2001/2004 29 C.A. No.18005 of 2017 M/s Manikgarh Cement Vs. The Commissioner of Customs and Central Excise Welding electrodes, Welding wire and sweet on paste etc. Used for repairs and maintenance of the plant and machinery, as capital goods. July, 2004 to September , 2004. Cenvat Credit Rules, 2002/200 4. 30 C.A. No. 18007 of 2017 M/s Manikgarh Cement Vs. Commissioner of Customs and Central Excise Welding electrodes, Welding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we shall deal with Civil Appeal No.2445 of 2007 as a representative case. Submissions on behalf of the Assessee 6. Ms. Charanya Lakshmikumaran, learned advocate appearing for the assessee - SAIL leading the arguments on behalf of the appellants submitted that Modvat Credit Scheme was introduced in the month of March 1986 with a clear intention to avoid cascading effect of taxation. It allowed credit on items used in or in relation to the manufacture of finished goods in the factory. The Scheme also incorporated provisions relating to reversal of credit on such items which are used in the manufacture of exempted finished goods. 7. Ms. Lakshmikumaran has bestowed our attention to the history of certain provisions of the Central Excise Rules, 1944 granting credit on inputs which we advert to. a) Prior to 01.03.1995, Rule 57A of Central Excise Rules, 1944 was the relevant provision which reads as follows: "Rule 57A. Applicability- (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the 'final products'), as the Central Government may, by notification in Official Gazette, specify in this behalf, for the purpose of allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Rules 1944 was further amended as under: "2. In the Central Excise Rules, 1944 (hereinafter referred to as the said rules), in rule 57A, - (i) in sub-rule (1), after the words "goods used in or in relation to the manufacture of the said final products", the following shall be inserted, namely :- "whether directly or indirectly and whether contained in the final product or not"; (ii) in the explanation to sub-rule (1), after clause (d) and before the portion "but does not include --" the following shall be inserted, namely :- "(e) accessories of the final product cleared alongwith such final product, the value of which is included in the assessable value of the final product,". d) The Rules pertaining to credit of duty paid on excisable goods used as inputs were recast by M.F. (D.R.) Notification No. 6/97- C.E.(N.T.), dated 01.03.1997 which reads 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, specify in this behalf for the purpose of allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Rules, 1944 that pertained to eligibility of credit provided as under: "57B. Eligibility of Credit of duty on certain goods. (1) Notwithstanding anything contained in rule 57A, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the following (inputs), used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final products or not, namely:- (i) inputs which are manufactured and used within 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 form 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 products cleared along with the final product, the value of which is included in the assessable value of the final product. Explanation - For the purposes of this sub rule, it is hereby clarified that the term inputs refers to such inputs as may be sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rule 2(g) reads as follows: "Rule 2(g) -"inputs" means all goods, except light diesel oil, high speed diesel 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, 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 final products or for any other purpose, within the factory of production. Explanation 1.- The Light Diesel Oil, High Speed Diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.- Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture;" (emphasis supplied) j) The Cenvat Credit Rules, 2002 were superseded by the Cenvat Credit Rules, 2004 w.e.f. 10.09.2004, which remained in vogue till the GST regime. The 2004 rules define input under Rule 2(k) as follows: "(k) input means- (i) all g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for providing any output service; but excludes- (A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) any goods used for- (a) construction of a building or a civil structure of a part thereof; or (b) Laying of foundation or making of structures for support of capital goods; except for the provision of any taxable service specified in sub-clauses (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act; (C) capital goods except when used as parts or components in the manufacture of a final product; (D) motor vehicles; (E) any goods such as food items, goods, used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product." (emphasis supplied) 8. It was submitted that in the instant matter the items in dispute were used either for repair or maintenance of the plant and machinery or for painting the final products or for manufacture of plants and machinery. That this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery in the factory as under: a) In Ramala Sahkari Chini Mills Ltd. vs. Commissioner, Central Excise, Meerut-I, (2010) 14 SCC 744, the question of law which arose was whether welding electrode used in the maintenance of machines is eligible for credit as 'inputs' under the Cenvat Credit Rules, 2002. This Court referred the matter to a larger bench on the question as to whether the inclusive portion of the definition of the term 'input' in Rule 2(g) of the Credit Rules, 2002 is to be given a restricted meaning to cover only the six enumerated items, or is to be understood to include items beyond the six items mentioned specifically in Rule 2(g). A three-Judge Bench of this Court in Ramala Sahkari Chini Mills Limited vs. Commissioner, Central Excise, Meerut-I, (2016) 7 SCC 585 held that the definition of the term 'input' in Rule 2(g) of the Credit Rules, 2002 is to be understood to include items beyond the six items mentioned specifically in Rule 2(g) and the word 'includes' in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension and not by way of restriction. b) Similarly, in CCE Raipur vs. Birla Jute and Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of the final product and therefore covered under the definition of inputs. These inputs on which credit has been denied are also undisputedly used within the factory of production. It is pertinent to note that without proper maintenance of various capital goods for which disputed products are essential, the final product cannot be manufactured. Hence, disputed products used for maintenance of capital goods / machinery is indirectly used in relation to the manufacture of finished goods. It was contended that denial of credit on the disputed products by the Revenue without taking into consideration the legal position is erroneous and not in consonance with the wide definition of inputs. Submissions on behalf of the Revenue 14. It is submitted by learned ASG that in order for the party to be eligible to take Cenvat Credit of the goods, it is essential that it should be used in relation to the manufacture of the final products whether directly or indirectly. Considering the nature/application of welding electrodes, tubes, pipes, steel plates etc. and the manufacturing process of the final products, it has been rightly held in the impugned orders that they have no role ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the said process or activity would, fall within the expression "in the manufacture of goods". They need not be ingredients or commodities used in the processes, nor must they be directly and actually needed for "turning out or the creation of goods". b) This Court held that cane baskets, material handling equipment, which are used to carry copper concentrate are used in the manufacture of final product vide Indian Copper Corporation Limited vs. Commissioner of Commercial Taxes, Bihar, AIR 1965 SC 891. c) In Member, Board of Revenue, West Bengal vs. Phelps & Co. (P) Ltd., (1972) 4 SCC 121, it was held that gloves used by workman in the factory are used in the manufacture of goods for sale. d) It was held by this Court that goods used as spare parts, tools, lubricants etc. are also used for 'manufacturing or processing' in Chowgule & Co. Pvt. Ltd. vs. Union of India, (1981) 1 SCC 653. e) This Court held that ammonia used in the treatment of effluents from the urea plant is used in the manufacture of ur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable as the same is essential for the manufacture of finished goods. Hence, credit on railway track material is available. In view of the aforesaid settled legal position, the interpretation of the expression "used in or in relation to manufacture" must be very wide and cover all items used in the process of manufacture whether directly or indirectly and whether contained in the final product or not. 19. Learned counsel for the appellant in Civil Appeal No.6133 of 2012 submitted that she will not press Cenvat credit claim in the Posithermo-Couple and therefore, the appeal is not pressed insofar as that claim is concerned. Her submission is placed on the record. Learned counsel for the appellants in Civil Appeal Nos.6411 of 2008 and 6136 of 2012 submitted that insofar as joint sheets are concerned, the order of the Commissioner (Appeals) is in favour of the appellant/assessee and the respondent has not assailed the said finding. Therefore, there is no controversy as such with regard to that item in these appeals. In Civil Appeal arising out of SLP (C) No.549 of 2016, the learned counsel for the appellant submitted that the appellant is aggrieved by the order of the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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