Cenvat credit for maintenance inputs allowed where welding electrodes are used in repair of manufacturing plant and machinery.

Cenvat credit on welding electrodes used for repair and maintenance of plant and machinery in cement and clinker manufacture was admissible because inputs employed in maintenance can still be used "in relation to the manufacture" of final products. The wider statutory phrase was applied to recognise an indirect but real nexus between upkeep of manufacturing equipment and the manufacturing process itself. On that basis, welding electrodes used for plant maintenance qualified for MODVAT/CENVAT credit, and the contrary demand could not be sustained.

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Issues: Whether cenvat credit is admissible on welding electrodes used for repair and maintenance of plant and machinery employed in the manufacture of cement and clinker.

Analysis: The issue was covered by the Supreme Court's earlier rulings holding that inputs used in repair and maintenance of plant and machinery, when such use is in relation to manufacture, fall within the wider expression "in relation to the manufacture of final products". The reasoning accepted that welding electrodes used for maintenance and upkeep are not confined to direct incorporation in the final product, yet remain eligible because the nexus with manufacture is indirect but real.

Conclusion: Cenvat credit on welding electrodes was held admissible and the contrary demand could not be sustained.

Ratio Decidendi: Inputs used for repair and maintenance of manufacturing plant and machinery are eligible for MODVAT/CENVAT credit where such use is in relation to the manufacture of final products, because the expression "in relation to" is of wide import.

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