My dear Yatin Bhopi,You can take the cenvat credit on welding electrodes, which are used in repair and maintenance of Plant & Machinery. as per the following latest CESTAT cases laws.1. In the case of THE KANORIA SUGAR & GENERAL MANUFACTURING COMPANY LTD Vs. CCE, Allahabadreported in 2013 (7) TMI 787 - CESTAT NEW DELHI the CESTAT Bench of Delhi while allowing the appeal has held that CENVAT - Welding electrodes used for repair and maintenance of plant and machinery are eligible for CENVAT Credit – Order set aside and appeal allowed: CESTAT [ paras  7 & 8].2. In another case of  DSCL SUGAR Vs. CCE, Lucknow reported in 2013 (7) TMI 786 - CESTAT NEW DELHI the same bench allowing the appeal has held that CENVAT - Welding electrodes used for repair and maintenance of plant and machinery are eligible for CENVAT Credit – Order set aside and appeal allowed: CESTAT [ paras 7 & 8].

IN THE CUSTOMS, EXCISE & SERVICE TAX

APPELLATE TRIBUNAL

West Block No. 2, R.K. Puram, New Delhi 110 066.

Principal Bench, New Delhi

COURT NO. IV

Excise Appeal No. 100 of 2011 (SM)

[Arising out of the Order-in-Appeal No. 339-CE/LKO/2010 dated 21/10/2010 passed by The Commissioner (Appeals), Customs & Central Excise, Lucknow.]

For Approval and signature :

Honble Shri Rakesh Kumar, Member (Technical)

1. Whether Press Reporters may be allowed to see:

the Order for publication as per Rule 27 of the

CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of :

the CESTAT (Procedure) Rules, 1982 for

publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair :

copy of the order?

4. Whether order is to be circulated to the :

Department Authorities?

M/s Bajaj Hindustan Ltd. Appellant

Versus

CCE, Lucknow Respondent

Appearance

Ms. Sukriti Das, Advocate for the appellant.

Shri B.B. Sharma, Authorized Representative (DR) - for the Respondent.

CORAM : Honble Shri Rakesh Kumar, Member (Technical)

DATE OF HEARING : 18/01/2013.

Final Order No. 55398/2013 Dated : 18/01/2013

Per. Rakesh Kumar :-

The appellant are manufacturers of sugar and molasses from sugarcane chargeable to Central Excise duty. During the period from April 2008 to December 2008, they availed Cenvat credit of Rs. 3,32,081/- in respect of MS Angles, Channels, Plates, Joists, GP Sheets etc. which according to the appellant had been used in fabrication of mill house machinery, such as Trace plate, pressure chute, Tough plate, Tail bar coupling, C.I. coupling, Rack elevator/rack carrier, base frame, gear box; I.D. fan of boiler, centrifugal

machine cover, magma body, evaporator, pan and centrifugal machine pipeline, platform of crystallize at boiling house, bagasse carrier, cable trey, 4 MW turbine of power house etc. The department being of the view the appellant are not eligible for above-mentioned Cenvat credit, issued a show cause notice dated 30th March 2009 for denying the same, its recovery alongwith interest and imposition of penalty. The show cause notice, however, alleged that all these items are in the nature of consumables used for repair and maintenance of the plant and machinery and, hence, would not be eligible for Cenvat credit. The show cause notice was adjudicated by the Assistant Commissioner vide order-in-original dated 27/1/10 by which he confirmed the above-mentioned Cenvat credit demand alongwith interest and imposed penalty of equal amount. In this order, the Assistant Commissioner observing that plant and machinery assembled at site cannot be treated as goods, held that steel items, in question, are neither covered by the definition of capital goods nor by the definition of input. On appeal to Commissioner (Appeals), this order of the Assistant Commissioner was upheld except for reducing the penalty to Rs. 70,000/-. Against this order of the Commissioner (Appeals), this appeal has been filed.

2. Heard both the sides.

3. Ms. Sukriti Das, Advocate, the learned Counsel for the appellant, pleaded that the appellant stand from the very beginning, as reflected in the reply to the show cause notice, has been that the steel items, in question, have been used for fabrication of various components of the sugar mill machinery, that components of sugar mill machinery are covered by the definition of capital goods and, hence, the steel items, in question, would be eligible for Cenvat credit, that the department has wrongly alleged that the steel items, in question, have been used in erection of supporting structures, while from the details of the use of the items as given in reply to the show cause notice, it is clear that the items, in question, have been used for fabrication of various items of sugar mill machinery and that in view of this, the impugned order uploading the Cenvat credit demand and imposition of penalty is not correct. In this regard, she also relies upon the judgment of the Apex Court in the case of CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. reported in 2010 (255) E.L.T. 481 (S.C.), judgment of Honble Chhattisgarh High Court in the case of Union of India vs. Associated Cement Company Ltd. reported in 2011 (267) E.L.T. 55 (Chhattisgarh), judgment of Honble Madras High Court in the case of CCE, Tiruchirapalli vs. India Cements Ltd. reported in 2012 (285) E.L.T. 341 (Mad.) and also the judgment of Honble Karnataka High Court in the case of CCE, Mysore vs. ICL Sugars Ltd. reported in 2011 (271) E.L.T. 360 (Kar.). She also pointed out that in terms of judgment of Honble Madras High Court in the case of CCE, Tiruchirapalli vs. India Cements Ltd. (supra) the CTD bars, TOR steel, Rebar coils and cement used for construction of plant comprising of concrete foundations, concrete silos for storing raw material etc. would be eligible for Cenvat credit. She pleaded that ration of the above-mentioned judgment of the Apex Court, High Courts and Tribunals is squarely applicable to the facts of this case. She, therefore, pleaded that the impugned order is not correct.

4. Shri B.B. Sharma, the learned Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner (Appeals) in it and emphasised that the steel items, in question, have been used in fabrication of the capital assessed fixed to the earth and, hence, the Cenvat

credit in respect of the same has been correctly denied and, as such, there is no infirmity in the impugned order.

5. I have considered the submissions from both the sides and perused the records.

6. On going through the order-in-original passed by the Assistant Commissioner, I find that at page 8 of the order, the Assistant Commissioner has given the following findings :

The impugned goods falling under Chapter 72/73 of the said Tariff Act, were used for fabrication of various mill house machinery such as Trace Plate, Pressure Chute, Tough Plate, Tail Bar coupling, Pinion/Pinion teeth, Hammer, Liner Art, C.I. Coupling, Rack Elevator/Rack Carrier, Base Frame, Gear Box; I.D. Fan of Boiler, fabrication of Centrifugal Machine cover, Magma body, Evaporator, Pan & Centrifugal machine pipe line, Platform of Crystallizer at Boiling House and fabrication of Bagasse Carrier runner, Cable Tray, 4 MW Turbine of Power House, etc. and also for its repair and maintenance. Plant and machinery assembled and erected at site cannot be treated as goods for the purpose of excise duty, if it is not marketable and immovable. The word goodsapplies to those which can be brought to the market for being brought and sold. This view was expressed by Honble Supreme Court in Delhi Cloth Mill reported in 1977 (1) E.L.T. (J 199) S.C. [five members constitutional bench] and has been consistently followed by the Apex Court in subsequent cases and by all the High Courts. It has been held that to become goods the articles must be something which can ordinarily come to the market to be brought and sold.

From the above findings of the Assistant Commissioner, which have been upheld by the Commissioner (Appeals), it is clear that the steel items, in question, have been used for fabrication of various items of sugar mill machinery. There is also no dispute that sugar mill machinery is covered by Chapter 84 and hence its components would also be covered by the definition of capital goods, as given in Rule 2 (a) of Cenvat Credit Rules, 2004. It is not the finding of the Commissioner (Appeals) that each and every item of machinery had come into existence as fixed to the earth structure. From the description of various items of component and machinery, as given in the order, it is clear that these items has been fabricated and thereafter the same were installed. I, therefore, do not agree that the various items of the components of sugar mill machinery, fabricated by the appellant were fixed to the earth structures. Just because an item of machinery or its component after being fabricated has been installed in course of which it has become fixed to the earth, the Cenvat credit cannot be denied. For considering the eligibility for Cenvat credit what has to be seen is as to whether an item covered by the definition of capital goods as given in Rule 2 (a) of the Cenvat Credit Rules, had been brought to the factory or had been fabricated in the factory and it is not material that after fabrication the same had been installed and became fixed to the earth. By this logic, Cenvat credit cannot be allowed in respect of most of the items of machinery which after being brought in the factory or fabricated in the factory, are installed after which the same become fixed/attached to earth. In my view, the Cenvat credit has been

wrongly denied. Therefore, the impugned order is not sustainable. The same is set aside. The appeal is allowed.

(Pronounced in the open court.)

(Rakesh Kumar)

Member (Technical)

PK

??

??

??

??

2

Customs, Excise and Gold Tribunal - DelhiPrism Cement Ltd. vs Cce on 3 January, 2006

Bench: M Ravindran

ORDER M.V. Ravindran, Member (J)

1. This appeal is directed against the Order-in-Appeal dated 27.2.2004 wherein it was held that credit of duty paid on electrodes is not eligible to the appellants.

2. The relevant facts arise for consideration are that the appellants are manufacturers of cement and have availed credit on many inputs and one of them is welding electrodes. The department sought to reverse the credit on electrodes on the ground that they are not inputs. The matter was adjudicated and the adjudicating authority confirmed the demand and also imposed penalty of Rs. 50,000/- on the appellants. On an appeal the Commissioner (Appeals) has also upheld the order-in-Original in toto.

3. Learned Advocate appearing for the appellants submits that the welding electrodes used by them in the factory is integral the process of manufacture as they are required for repairing and rebuilding of the parts which gets worn out. He also submits that for crushing the lime stone into fine powder the machinery which is used gets worried out and it is required to be replaced or gap has to be filled and for this purpose welding electrodes are used by the appellants. He also submits that the said welding electrodes are also used for re-building and re-fabricating the sheet in the cement mills. He submits

that the Larger Bench decision in the case of Jaypee Rewa Plant v. CCE, Rajpur is on the ground that the said decision did not consider that the plant and machinery can be repaired even while running. The Larger Bench had not considered, that, unless until the machinery is repaired they would not cope up to demand of production. He submits that he would rely upon the decision of the Larger Bench in the case of CC & CE, Meerut-I v. Modi Rubber Ltd. and Maihar Cement v. CCE, Raipur which are directly on the point which was not placed before the Larger Bench in the case of Jaypee Rewa Plant case.

4. Learned D.R. on the other hand submits that the Larger Bench in the case of Jaypee Rewa Plant has considered all the arguments which were placed before them and which are similar to the arguments of the Advocate that welding electrodes are not eligible for credit. He also relies upon the decision in the case of Indian Seamless Metal Tubes Ltd. v. CCE, Aurangabad 2004 (177) ELT 374 (Tri.-Mumbai).

5. Considered the submission of both sides and perused the record. I find that it is not in dispute that welding electrodes which are used for the appellants in their cement factory is for repair and maintenance of machinery. However, the said maintenance and repair may be required for smooth functioning of the plant, the use of welding electrodes would not get covered, now, in the said machinery. The Larger Bench in the case of Jaypee Rewa Plant has in Para 6 categorically considered the relevant law as it stood during the period and came to the conclusion that welding electrodes used for repair

and maintenance of machinery were not eligible for inputs for Cenvat Credit under the Rules.

6. In view of the above Larger Bench decision directly on the point of welding electrodes being not considered as inputs I find that the Larger Bench decision in the case of Modi Rubber is not applicable and does not carry that much weight. Further the decision relied upon in the case of Maihar Cement was delivered on 24.10.2002 which was prior to the decision of the Larger Bench's order in the case of Jaypee Rewa Plant. The reason, not citing of Modi Rubber and Maihar Cement case before the Larger Bench, would not in any way vitiate order of the Larger Bench in the case of Jaypee Rewa Plant. Reliance placed by the learned Advocate in the case of Indian Seamless Metal Tubes Ltd. v. CCE, Aurangabad would be of no help to me, as, the learned Single Member disagreeing with the Larger Bench decision could have referred the matter to further Larger Bench, but after distinguishing Jaypee Rewa case he did not refer the matter but went on a different direction stating that welding electrodes eligible as capital goods. I am unable to agree with the findings of the learned Single Member Bench in the case of Indian Seamless Metal Tubes Ltd.

7. In view of the above findings I do not find any merit in the appeal of the appellants. Accordingly the appeal is dismissed, but penalty imposed on the appellants is unwarranted as the whole dispute of credit on welding electrodes was being challenged in one forum or another. Therefore, penalty on the appellants is set aside. Appeal partly allowed.

(Dictated & pronounced in the Open Court.)

Customs, Excise and Gold Tribunal - Bangalore

The Commissioner Of Customs And ... vs Satavahana Ispat Ltd. And Ors. on 26 March, 2007

Equivalent citations: 2007 (119) ECC 347, 2007 ECR 347 Tri BangaloreBench: S Peeran, J T T.K.

ORDER S.L. Peeran, Member (J)

1. In all these 10 appeals the common question of law and facts are involved, hence they are taken up together for disposal as per law. The revenue and the party both are aggrieved with the respective orders. The issue involved in the

matter is as to whether the assessee is eligible for Cenvat credit in respect of welding electrodes used in the repair of capital goods in the factory. The Commissioner (A) while deciding the matter in assessee's favour in which the revenue is aggrieved have contended that assessee is not eligible for the benefit of Cenvat credit in respect of welding electrodes and they cite the larger bench judgment rendered in the case of Triveni Engg. and Industries Ltd. v. CCE, Meerut 2005 (186) ELT 158 (Tri.-LB).

2. The learned advocates contentions is that this judgment is rendered per curiam to the ruling rendered in the case of India Sugars and Refineries Ltd. v. CCE, Bangalore 2006 (74) RLT 61 (CESTAT-Ban.) which has referred to 3-Member Larger Bench judgment of the Tribunal in the case of Jaypee Rewa Plant v. CCE, Raipur 2003 (57) RLT 739; Mira Silk Mills v. CCE, Mumbai 2003 (56) RLT 152 (LB); CCE, Meerut-I v. Modi Rubber Ltd. 2000 (38) RLT 718 (LB); Union Carbide India Ltd. v. CCE, Calcutta-I 1996 (15) RLT 144 (LB), Punjab and Haryana High Court ruling rendered on this very issue in the case of CCE, Chandigarh-II v. National Fertilizers Ltd., Bathinda and Anr. 2002 (79) ECC 758 (P & H) and the following supreme Court judgments.

(a) CCE, Calcutta-II v. Eastend Paper Industries Ltd.

(b) Indian Farmers Fertilizers Co-operative Ltd. v. CCE, Ahmedabad 1996 (15) RLT 498

(c) Steel Authority of India Ltd. v. CCE AIR 1986 SC 2544

(d) Collector v. Ballarpur Industries Ltd.

(e) J.K. Cotton Spinning and Weaving Mills company Ltd. v. Sales Tax Officer 1997 (91) ELT 34

(f) Dokka Samuel v. Dr. Jacob Lazarus Chelly Besides the Patna High Court judgment rendered in the case of Collector v. Tata Engineering & Locomotive Company Ltd. 1999 (31) RLT 800 (Patna).

2.1 The Counsels further pointed out that in all these present cases the period is subsequent to the amendment brought to the Cenvat Credit Rules which has been referred to by the Commissioner in the revenue appeals wherein the definition of capital goods has been given in Rule 2(b) of CE Cenvat Credit Rules 2004 and further defines that capital goods means Rule 2

(a) "Act" Means Central Excise Act, 1944

(b) "Capital Goods" means

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii) used in the factory of the manufacturer of the final products but does not include any equipment or appliance used in an office.

The Commissioner (A) after examining this aspect has noticed that credit is available to an item which is used in the factory of the manufacturer of final products. He has noted that although Rule 2 (b) (i) of Cenvat Credit Rules 2002 does not refer to welding electrodes but the same are well covered under 2 (b) (iii) of the said Rules, which covers all components, spares and accessories of goods specified at (i) and (ii) of Rule 2 (b). The Commissioner (A) also referred to the Tribunal ruling rendered in the case of CCE, Chandigarh v. Oswal Fats and Oils and DCL Polysters Limited v. CCE, Nagpur .

2.2 The learned Counsels also pointed out that the Supreme Court in the case of Jaypee Rewa Plant v. CCE have clearly stated that once the goods are used in the factory then they are eligible for the benefit of Cenvat credit. Therefore, it is pointed out that the judgment of Triveni Engg. and Industries Ltd. (supra) does not deal with all the aspects dealt with by the Supreme Court in their judgment and other 3-Member Larger Bench judgment cited supra. All these matters have been seen in detail in the case of India Sugars and Refineries Ltd. (supra).

2.3 The learned advocate Shri Shivadass arguing for M/s. Rashtriya Ispat Nigam Limited (RINL) also pointed out that one more issue is involved in their case inasmuch as Cenvat credit has been denied on gasses as well as on inputs used in manufacture of capital goods which were in turn used in the

factory for production. He refers to the Board's Circular No. 31/90-CX.8 dated 31.5.1990 and the Larger Bench judgment rendered in the case of CCE v. Modi Rubber Ltd. and Jaypee Rewa Plant v. CCE 2003 (57) RLT 739. He submitted that inputs used for manufacture of capital goods are covered by Explanation Rule 2 to Rule 2 of Cenvat Credit Rules, 2002 and credit cannot be denied. Likewise, credit on capital goods is covered by the definition in Rule 2(b)(i) of Cenvat Credit Rules, 2002 and so also with regard to the second installment of capital goods utilized. He also submitted that credit on gases is covered by the Board's circular and the citations referred to. Therefore, he submits that appeal is also required to be allowed.

3. The learned JCDR arguing for the revenue contended that the revenue appeals are required to be allowed and parties' appeals should be rejected in view of the 3-Member Larger Bench judgment rendered in the case of Triveni Engg. and Industries (supra).

4. We have carefully considered the submissions and noted the points referred including the citations. It is necessary to extract the findings recorded by the Tribunal in the case of India Sugar and Refineries Ltd. (supra) with regard to the eligibility of credit on welding electrodes, oxygen gas and acytelene gas used for welding punctured pipes carrying hot sugar juice during manufacture of sugar. This judgment was rendered in the light of several Larger Bench judgment of Tribunal, High Courts judgments of Punjab & Haryana and

Patna and Supreme Court judgments. The findings recorded in Para 4 and 5 are reproduced herein below.

4. On a careful consideration of submissions made by both sides and on perusal of the entire judgments, it is seen from the Larger bench judgment rendered in the case of Jaypee Rewa Plant v. CCE, Raipur (supra) that the Larger Bench has held that Welding Electrodes and Gases used in fabrication/manufacture of Capital Goods for captive consumption is not eligible for the benefit of Modvat credit. This Larger bench, noting the ruling of Apex Court judgment rendered in the case ofJ.K. Cotton Spinning and Weaving Mills Company Ltd. v. Sales Tax Officer 1997 (91) ELT 34(SC), took a view that the repairs and maintenance of machinery are not normally done when the process of manufacture of goods with such machinery is under way. It also held that the process is not a part of, or integrally connected with, the process of manufacture of final product. This Larger Bench did not take into consideration, the earlier Larger Bench decision rendered in the case of CCE v. Modi Rubber Ltd. headed by the then President Justice K. Sreedharan and the other members as were in Jaypee Rewa Plant. In Modi Rubber Ltd.'s case, it was held that unless the machinery of the assesses are lubricated with the lubricants, heat will be generated on account of mechanical friction between the working surfaces of the machinery leading to adverse consequences affecting the process of manufacture. On that premise, they held that lubrication of the machines and machinery is essential for their working and, for that matter, for the smooth process of manufacture of final products. It has been held that lubrication

of the machinery is an activity which is concerned with or pertaining to the manufacture of the finished products. It has further been held that it is rather integrally connected with the manufacture and that the use of lubricants in the machinery is certainly in or in relation to the manufacture of the finished products. This reasoning should have been adopted in Jaypee Rewa Plant but the very Member who wrote the order in CCE v. Modi Rubber Ltd., has given a different interpretation in Jaypee Rewa Plant. In order to resolve the controversy, the matter is required to be again referred to still Larger Bench but, however, in terms of Larger Bench judgment rendered in the case of Mira Silk Mills v. CCEcomprising of same Members as in the case of Jaypee Rewa plant, wherein it has taken a view that when the Tribunal takes a decision without referring to case-law, then it would be an error apparent on the face of the record in terms of Apex Court judgment rendered in the case of Dokka Samuel v. Dr. Jacob Lazarus Chelly . It has also held that the High Court decision will prevail over the Tribunal decision even if it is a Larger bench decision. It has also held that the decision of Apex Court will prevail under Article 141 of the Constitution. In the light of this observation, we have to see as to whether the ruling of Jaypee Rewa Plant is a good law or not. The Punjab & Haryana High Court, in the case of CCE, Chandigarh-II v. National Fertilizers Ltd. (cited supra) has held in paras 7 to 9 as follows:

7. We have considered the arguments of Mr. Sehgal. The steam generation and its ultimate generation of electricity is a part and parcel of the composite process, which produces the final product, i.e. fertilizer. For the effective running of any

plant, maintenance and overhauling of the machinery is necessary. It is an integral part in the process of production. Similar question came up for adjudication before their Lordships of the Apex Court in Collector of Central Excise, Calcutta-II v. Eastend Paper Industries Ltd. , where it was held "Where any particular process...is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression 'in the manufacture of goods'." Similar question also arose in Indian Farmers Fertilizer Co-operative Ltd. v. Collector of Central Excise, Ahmedabad , wherein the Apex Court has held:

9. That leaves us to consider whether the raw naptha used to produce the ammonia which is used in the effluent treatment plant is eligible for the said exemption. It is too late in the day to take the view that the treatment of effluents from a plant is not an essential and integral part of the process of manufacture in the plant. The emphasis that has rightly been laid in recent years upon the environment and pollution control requires that all plants which emit effluents should be so equipped as to rid the effluents of dangerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end product is part and parcel of the manufacturing process of that end product. The ammonia used in the treatment of effluents from the urea plant of the appellants has, therefore, to be held to be used in the manufacture of urea and the raw naptha used in the

manufacture of such ammonia to be entitled to the said exemption.

The same view was also expressed by the Apex Court in Steel Authority of India Ltd. Etc. v. Collector of Central Excise .

8. As a sequel to the above discussion, it is held that the furnace oil, which was used in the manufacture of steam, which in turn was further used in the generation of electricity during the shut-down period, was entitled to the concessional rate of duty.

9. In the end result, the reference petition filed by the revenue is dismissed in limine.

5. As can be seen from the above finding that for the effective running of any Plant, maintenance and overhauling of the machinery is necessary and it is an integral part in the process of manufacture. The Punjab & Haryana High Court has referred to earlier two Supreme Court judgments (i) CCE v. Eastend Paper Industries Ltd. and (ii) Indian Farmers Fertilizers Cooperative Ltd. v. CCE. The ratio of the Punjab & Haryana High Court, and the other two Supreme Court judgments noted therein, have not been referred to by the Larger Bench in the case of Jaypee Rewa Plant. Thus the findings rendered in the case of Jaypee Rewa Plant, denying the benefit of Modvat in respect of welding electrodes and Gases, is contra to the judgments rendered by the Punjab & Haryana High Court and the Supreme Court judgments noted therein. In terms of the Punjab & Haryana High Court and the Supreme Court judgments noted therein, maintenance and

overhauling of machinery is an integral part in the process of production. Therefore, the decision of the Larger Bench, rendered in the case of in CCE v. Modi Rubber Ltd. (supra), holds that lubricating oils and greases used for the purpose of lubricating the machines and machinery is to be taken as a process for the manufacture of final product, as it is essential for their working and integrally connected with the manufacture. This Larger Bench has referred to the Supreme Court judgment rendered in the case of Collector v. Ballarpur Industries Ltd. , Collector v. Eastend Paper Industries Ltd. (supra) and also that of the Patna High Court judgment rendered in the case of Collector Tata Engineering & Locomotive Company Ltd. 1999 (31) RLT 800 (Patna). A combined reading of the P&H High Court judgment and the Modi Rubber Ltd. Case clearly supports the plea that Welding Electrode pipelines carrying hot sugar juice is also a process of manufacture and it is an integral part in the process of production of filial goods. Another Larger Bench, in the case ofUnion Carbide India Ltd. v. CCE , has held that the words Inputs 'in relation to the manufacture' has been used to widen and expand the scope so as to attract goods which do not enter directly or indirectly into the finished product but are used in any activity concerned with or pertaining to the manufacture of final goods. On the premise of this reasonin, the Larger Bench has held that Copper Wire used in welding process in the manufacture of metal containers should be considered as an eligible input and not to be treated as a tool, machinery or appliance. Therefore, the Larger Bench ruling of Union Carbide India Ltd. and the Larger Bench judgment rendered in the case of Modi Rubber Ltd. having been rendered in the light

of the Apex Court judgment and the definition of the term 'Input' and the ratio of these rulings clearly overrules the Larger Bench judgment of Jaypee Rewa Plant. In the result, applying the ratio of the Punjab & Haryana High Court judgment noted supra, which in turn refers to two Supreme Court judgments, and by following the ratio of the Larger Bench judgments rendered in Modi Rubber Ltd. and Union Carbide Ltd., the appellant's plea is required to be accepted. The inputs viz. Welding Electrodes, Oxygen Gas and Acetylene Gas used for welding the punctured pipes carrying the hot sugar juice should be treated as part of process of manufacture and hence they are eligible inputs for the manufacture of the final product. The appeal is allowed with consequential relief, if any.

4.1 As can be seen from the above extraction that the issue is fully discussed in the light of the Supreme Court judgments and High Court judgments, therefore, the judgment cited by learned JCDR that is in the case of Triven Engg. & Industries Ltd. does not discuss the issue in detail and has not dealt with earlier judgments of Supreme Court, High Courts and Tribunals. Therefore, the contention raised by the counsels that the Larger Bench judgment of Triveni Engg. and Industries Ltd. (supra) has been referred as per curiam to the judgments of Supreme Court, High Court and Larger Bench of Tribunal is a correct point and is upheld. Furthermore, the judgment of rendered in the case of Triveni Engg. and Industries Ltd. (supra) does not refer to the amended rules which clearly permits the appellants to avail the benefit of Cenvat credit, if the inputs are used in the factory. While in the

earlier rules it was required to have been used in the manufacture of final products i.e. the subtle difference is discussed by the Commissioner (A) in all the revenue appeals in the context of changed law. The contention raised by the assessee's is required to be upheld. As a consequence, we hold that assessees are eligible to avail cenvat credit in respect of welding electrodes in the light of the judgments cited by the counsels noted supra and findings rendered by us in the case of India Sugars and Refineries Ltd. (supra). The revenue appeals are dismissed and party's appeals on this point are allowed.

4.2 In so far as the appeals of RINL is concerned, the another issue besides the claim of benefit of Cenvat credit on welding electrodes is pertaining to eligibility of credit on inputs used for manufacture of capital goods, this issue is covered by the Explanation 2 to Rule 2 of Cenvat Credit Rules 2002 and the authorities have not clearly seen this point. In so far as the credit availed on capital goods is concerned, the same is also covered by Chapter Headings specified in Rule 2(b)(i) of Cenvat Credit Rules 2002. So far as credit on gases are concerned, the issue is covered by the Board's Circular No. 31/90-CX.8 dated 31.5.1990 and two judgments cited by the learned Counsel on this point. The appeals of RINL are also allowed. In the result, the revenue appeals are dismissed and parties' appeals are allowed.

(Operative portion of this Order was pronounced in open court on conclusion of hearing)

Customs, Excise and Gold Tribunal - Delhi

The Dhampur Sugar Mills Ltd. vs Cce on 12 November, 2007

Equivalent citations: 2008 (126) ECC 149, 2008 (152) ECR 149 Tri DelhiBench: P Das

ORDER P.K. Das, Member (J)

1. Common issue involved in these appeals and therefore, all are taken up together for disposal.

2. The relevant facts of the case are that the appellants are engaged in the manufacture of V.P. Sugar and molasses classifiable under heading No. 17.01 and 17.03 of the schedule to the Central Excise Tariff Act, 1985. In this case, credits are denied on various capital goods, as the same are not capital goods within the definition of the Cenvat Credit Rules. The admissibility of the credit on the said items are discussed herein below:

A) Asbestos & Graphite Packing, Jointing Sheets, Rubber Sheet etc. The Commissioner (Appeals) observed that these items used for packing of streamline etc. for prevention of leakage and they have nothing to do with the manufacture of final product.

The appellant contented that it is used as mechanical use for the heat, liquid etc. attached to the machine. The Tribunal in the case of Titawi Sugar Complex v. CCE, Meerut reported in 2006 (195) ELT 243 (Tri-Del.) held that asbestos packing eligible for modvat credit. Further, the Tribunal in the case of KCP Sugar & Inds. Ltd. v. CCE, Guntur reported in 2004 (178)

ELT 275 (Tri. Bang.), held that asbestos fibres used for preventing leakage in pipes connected with flanges to transfer cane juice used in the machinery. Therefore, cenvat credit on these items are allowed.

B) HR/SS Plate, Shape & Section Steel Flat, SS Sheet The Commissioner (Appeals) observed that these items are commonly known to the construction /fabrication material. The Commissioner (Appeals) observed that these items cannot be used as such, as component parts of the capital goods and treated as raw material of the capital goods. Regarding extrusion bar, it has been observed that the appellant has not explained exact use of extrusion bar.

The learned Advocate submits that the appellant categorically stated before the lower authority that these items were used as component for cane handling machine. Extrusion bar is used as component of power turbine for power generation. He submits that the appellant's own case, the Tribunal vide final Order No. 1351/07 -SM (Br.) dated 28.8.2007 allowed cenvat credit on S.S. plats. He also submits that the Hon'ble High Court of Rajasthan in the case of Union of India v. Hindustan Zinc Ltd reported in 2007 (214) ELT 510 held that MS/SS Plates are used in workshop machine for repair and maintenance of machinery which are used for manufacture of final product are entitled to avail modvat credit. He submits that the said decision was upheld by the Hon'ble Supreme Court as reported in 2007 (214) ELT A115.

I find that there is no dispute that these items are eligible for cenvat credit used for repair and maintenance of machinery as

well as used for manufacture of final products. In the present case, both the authorities below failed to verify the use of the said material. Therefore, denial of credit on those items are not admitted it is remanded back to the adjudicating authority to examine the use of the said item and to pass fresh order in accordance with law after considering the submission of the learned Advocate.

C) V. Belt:

The learned Advocate on behalf of the appellant submits that the Commissioner (Appeals) vide Order-in-Appeal No. 225-CE/MRT-II/2005 dated 23.09.2005 held that V. Belt are basically construction/fabrication material and denied the credit thereon. But, by Order-in-Appeal No. 229-CE/MRT-II/2005 dated 23.9.2005 allowed the credit on V. Belt. It is observed that V, Belt is used in centrifugal machine power transmission for masscuite curing between motor and shaft. He has followed the decision of the Hon'ble Supreme Court decision in the case of JCT Electronics reported in 2001 (127) ELT A52 held that V. Belt is eligible capital goods. Hence, credit denied on V. Belt in appeal No. E/3842/2005 is set-aside.

D) Alpha, SMR, DEU Oil Super 20W etc. It is used for lubrication in machinery. The Commissioner observed that these items do not fall within the ambit of capital goods.

The learned Advocate relied upon the larger bench decision of the Tribunal in the case of CC &CE, Meerut-I v. Modi Rubber Ltd., reported as held that lubricating oils and greases used for

the purpose of lubricating the machines and machinery which are used for the manufacture of final product. It has further been held that lubrication of the machine is essential for their working and integrally connected with the manufacture and lubricants are entitled for cenvat credit.

The Tribunal in the case of Ultra Sugar Mills Ltd. v. CCE reported in 2006 310 (Tri-Del) following the larger bench decision allowed credit on the lubricant. Respectfully following the decision of the larger bench of the Tribunal denial of credit on these items are set-aside.

E) Shaft The Commissioner (Appeals) observed that the appellant has not described its specific use. It is seen from the impugned order that the appellant stated that the said item used as component of bagasses carrier for bagassee handling. The Tribunal in the case of Titawi Sugar Complex v. CCE, Meerut reported in 2006 (195) ELT 243 (Tri-Del.) held that shafts are components of mill roller and since the mill machinery itself is specified under Rule 57Q components thereof are covered in the table appended to Rule 57Q. So, following the decision of the Tribunal, denial of credit on shaft is set-aside.

F) Welding Electrodes Aquat and Hydrogen gas The Commissioner (Appeals) observed that welding, electrodes are used for repairing of machine in the mill. He relied upon the larger bench decision of the Tribunal in the case of Jaypee Rewa Plant v. CCE reported in 2003(57) RLT 739(LB).

The learned Advocate submits that Aqua and Hydrogen gas were used as chemical for cooling water treatment reaction for controlling temperature. He submits that welding electrodes was not used for repair and maintenance of the machinery and larger bench decision of the Tribunal is not applicable here.

3. I find the larger bench of the Tribunal in the case of Jaypee Rewa Plant held that welding electrodes are not eligible for cenvat credit as repair and maintenance of machinery and cannot be considered to have been used in or in relation to the use of the finished product. So, credit on welding electrodes are denied. Regarding credit on Aquat and Hydrogen gas, I find that the appellant has made a categorical submission that these items were used for as chemical for cooling water treatment reaction for controlling temperature, which is required to be verified by the lower authority. So, the denial of credit on aquat and hydrogen gas is set-aside and same is remanded back to the adjudicating authority to examine and verify the use of the said items.

4. It is seen that the adjudicating authority imposed penalty of equal amount of duty. I find that denial of credit on the basis of interpretation of the provisions of law. Therefore, I set-aside the penalty in all these appeals. Appeals are disposed of in the above terms.

(Order dictated and pronounced in the open Court)