2007 (3) TMI 601 - AT - Central Excise

Assessees eligible for Cenvat credit on welding electrodes and gases

COMMISSIONER OF CUS. AND C. EX., TIRUPATI Versus SATAVAHANA ISPAT LTD.

COMMISSIONER OF CUS. AND C. EX., TIRUPATI Versus SATAVAHANA ISPAT LTD. - 2007 (219) E.L.T. 975 (Tri. - Bang.) Issues Involved:1. Eligibility for Cenvat credit on welding electrodes used in the repair of capital goods.2. Eligibility for Cenvat credit on gases and inputs used in the manufacture of capital goods.Summary:Issue 1: Eligibility for Cenvat credit on welding electrodes used in the repair of capital goods.In all these 10 appeals, the common question of law and facts involved is 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) decided in favor of the assessee, but the revenue is aggrieved, citing the Larger Bench judgment in the case of *Triveni Engg. & Industries Ltd. v. CCE, Meerut - 2005 (186) E.L.T. 158 (Tri.-LB)*.The learned Advocates argued that this judgment is per curiam to the ruling in *India Sugars and Refineries Ltd. v. CCE, Bangalore - 2006 (205) E.L.T. 717 (T)*, which referred to several other judgments, including those of the Supreme Court and High Courts. They pointed out that the period in question is subsequent to the amendment to the Cenvat Credit Rules, 2004, which defines capital goods in Rule 2(b). The Commissioner (A) noted that although Rule 2(b)(i) does not refer to welding electrodes, they are covered under Rule 2(b)(iii) as components, spares, and accessories.The Tribunal, after considering the submissions and various judgments, concluded that the ruling in *Jaypee Rewa Plant v. CCE - 2003 (159) E.L.T. 553 (Tri.-LB)*, which denied the benefit of Modvat credit for welding electrodes, did not consider earlier judgments. The Tribunal held that maintenance and overhauling of machinery are integral parts of the manufacturing process, as supported by the Punjab & Haryana High Court and Supreme Court judgments. Therefore, the assessee's plea for Cenvat credit on welding electrodes is upheld, and the revenue appeals are dismissed.Issue 2: Eligibility for Cenvat credit on gases and inputs used in the manufacture of capital goods.For M/s. Rashtriya Ispat Nigam Limited (RINL), another issue involved is the denial of Cenvat credit on gases and inputs used in the manufacture of capital goods, which were in turn used in the factory for production. The learned Advocate referred to the Board's Circular No. 31/90-CX.8, dated 31-5-1990, and the Larger Bench judgment in *CCE v. Modi Rubber Ltd. - 2000 (119) E.L.T. 197 (LB)*. He argued that inputs used for manufacturing capital goods are covered by Explanation Rule 2 to Rule 2 of Cenvat Credit Rules, 2002, and credit on gases is covered by the Board's circular and cited judgments.The Tribunal agreed with the learned Advocate's submissions, noting that the authorities had not clearly seen the point regarding the eligibility of credit on inputs used for manufacturing capital goods. The Tribunal held that the credit on gases is covered by the Board's Circular and relevant judgments. Consequently, the appeals of RINL are allowed, and the revenue appeals are dismissed.Conclusion:The Tribunal held that the assessees are eligible for Cenvat credit on welding electrodes, gases, and inputs used in the manufacture of capital goods, dismissing the revenue appeals and allowing the parties' appeals.