2006 (12) TMI 342 - AT - Central Excise

Tribunal Affirms Denial of Cenvat Credit for Gases in Machinery Repairs, Citing Larger Bench Precedent.

The Tribunal dismissed the appeals, affirming the denial of Cenvat credit for oxygen and acetylene gases used in machinery repairs and maintenance. It ... Cenvat/Modvat - Use of oxygen and acetylene gases - repairs of various parts of machinery and restructuring and refurbishing - capital goods - Judicial discipline - Binding precedent - Commissioner (Appeals) held that the issue was no longer res integra since the Larger Bench of the Tribunal by its decision in Jaypee Rewa Plant v. CCE [2001 (8) TMI 1332 - SUPREME COURT], held that credit would not be admissible where these gases have been used for the repairs and maintenance of plant and machinery. While upholding the decision of the adjudicating authority in both the matters denying Cenvat credit in respect of the use of these gases by the appellant, the appellate Commissioner set aside the penalties imposed on the appellant. HELD THAT:- It is clear that the Division Bench in India Sugars [2005 (11) TMI 161 - CESTAT, BANGALORE] could not have taken upon itself to consider the question as to whether the earlier decision of the Larger Bench in Jaypee Rewa [2003 (3) TMI 145 - CEGAT, NEW DELHI] needed to be reconsidered and revised, in view of the decision of the Hon’ble Supreme Court in Lala Shri Bhagwan and another v. Ram Chand and another [1965 (3) TMI 72 - SUPREME COURT], in which it was held that: “It is hardly necessary to emphasise that consideration of judicial propriety and decorum require that if a learned single Judge hearing a matter is inclined to take the view that the earlier decision of the High Court whether of a Division Bench or of a single Judge, needs to be re-considered, he should not embark upon that enquiry sitting as a single Judge, but should refer the matter to a Division Bench or, in a proper case, place the relevant papers before the Chief Justice to enable him to constitute a Larger Bench to examine the question. That is the proper and traditional way to deal with such matters and it is founded on healthy principles of judicial decorum and propriety. It is to be regretted that the learned Single Judge departed from this traditional way in the present case and chose to examine the question himself.” Faulty attitudes in a decision-making process can destroy the institutions. Decisions can be corrected only by the superior forums or on review, but when attitudes become faulty the very basis of judicial institutions would get shaken, leading to utter chaos and confusion. Therefore, this court is bound to follow the Larger Bench decision in preference to the decision of the Division Bench, which could not have declared a Larger Bench decision as overruled. Only a Bench larger than the said Larger Bench deciding Jaypee Rewa Plant (supra) could have declared that decision to have been either expressly or impliedly overruled by a decision of a higher forum, or itself overruled it. Therefore, none of the contentions raised on behalf of the appellant 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. Issues Involved:1. Admissibility of Cenvat credit for oxygen and acetylene gases used for repairs and maintenance of machinery.2. Interpretation of 'inputs' under Rule 2(g) of the Cenvat Credit Rules, 2002.3. Application of precedents and judicial discipline in following larger bench decisions.Issue-Wise Detailed Analysis:1. Admissibility of Cenvat Credit for Oxygen and Acetylene Gases Used for Repairs and Maintenance of Machinery:The appellant claimed Cenvat credit for oxygen and acetylene gases used in repairing machinery, arguing these were indirectly used in manufacturing cement. The adjudicating authority denied the credit, stating these gases were used for plant repairs, not directly in manufacturing cement or clinker, and thus did not qualify as 'inputs' under Rule 2(g) of the Cenvat Credit Rules, 2002. The Commissioner (Appeals) upheld this decision, referencing the Larger Bench decision in Jaypee Rewa Plant v. CCE, Raipur, which held that gases used for repairs and maintenance of machinery were not eligible for Cenvat credit.2. Interpretation of 'Inputs' Under Rule 2(g) of the Cenvat Credit Rules, 2002:The appellant argued that the gases should be considered as 'inputs' under Rule 2(g) and cited explanation 2, which includes 'goods used in the manufacture of capital goods which are further used in the factory of the manufacturer.' The appellant contended that these gases were accessories to welding machines, which are capital goods. However, the Tribunal found this argument unconvincing, stating that explanation 2 applies only when goods are used to manufacture capital goods within the factory, which was not the case here. The gases were used for maintenance and repairs, not for manufacturing capital goods.3. Application of Precedents and Judicial Discipline in Following Larger Bench Decisions:The Tribunal emphasized the importance of judicial discipline and the binding nature of larger bench decisions. It noted that the Larger Bench decision in Jaypee Rewa Plant, which denied Cenvat credit for gases used in repairs and maintenance, was binding. The Tribunal criticized the Division Bench in India Sugars and Refineries Ltd. for attempting to overrule the Larger Bench decision without referring the matter to a still larger bench. The Tribunal reiterated that a single member or division bench must follow larger bench decisions unless a higher forum explicitly overrules them.Conclusion:The Tribunal dismissed the appeals, affirming the denial of Cenvat credit for oxygen and acetylene gases used in repairs and maintenance of machinery. It upheld the Commissioner (Appeals)'s decision, which followed the binding precedent set by the Larger Bench in Jaypee Rewa Plant. The Tribunal underscored the necessity of adhering to judicial discipline and the proper procedure for challenging larger bench decisions.