TaxTMI 
TaxTMI 
2009 (7) TMI 217
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....AB of the said Act and had imposed penalty to the tune of Rs. 5 lakhs on the appellants under Rule 13 of the Cenvat Credit Rules, 2002 and Rule 15 of the Cenvat Credit Rules, 2004 besides imposing mandatory penalty of Rs. 38,43,039/- under Section 11AC of the said Act. The Commissioner (Appeals) by his order dated 18-3-2009 has dismissed the appeal filed by the appellants and has confirmed the order passed by the Joint Commissioner, hence the present appeal. 3. Few facts relevant for the decision as revealed from the records are that the Cenvat credit claimed by the appellants in relation to the duty paid on welding electrodes has been rejected by the lower authorities. It was the claim of the appellants that the welding electrodes were the inputs used in relation to the manufacture of the final product namely cement. It is the case of the appellants that the machines which are used for manufacture of cement, over a period of time get damaged due to the usage thereof and require repairs. Such repairs are carried out by replacement of worn out or damaged teeth/edges and the same involves process of welding, and for the purpose of welding, electrodes are required and, therefore, t....
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....t for manufacture of the final product and, therefore, the welding electrodes also indirectly form the inputs used in the final product or in relation to the manufacture of the final product. He further submitted that unless machines are maintained in repaired condition and there is proper upkeep, manufacture of final product is not possible and, therefore, all the inputs which are utilized for upkeep of manufacturing machine would be the inputs utilized in relation to the manufacture of the final product. He has relied upon large number of judgments and orders in support of his contention and they include J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO reported in 1997 (91) E.L.T. 34 (S.C.), Indian Farmers Fertiliser Coop Ltd. v. CCE reported in 1996 (86) E.L.T. 177 (S.C.), Impression Prints v. CCE reported in 2005 (187) E.L.T. 170 (S.C.), Mathania Fabrics v. CCE. Jaipur reported in 2008 (221) E.L.T. 481 (S.C.), CCE, Pune v. TELCO reported in 2003 (158) E.L.T. 130 (S.C.), Asahi India Safety Glass Ltd. v. Union of India reported in 2005 (180) E.L.T. 5 (Del.), Singh Alloys & Steel v. Assistant Collector of Central Excise reported in 1993 (66) E.L.T. 594 (Cal.) and CCE, Tiruchirapalli ....
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....bmitted that it is not the case of the appellants that the welding electrodes are the capital goods. It is essentially the case of the appellants that they are the inputs used in relation to the manufacture of the final product. Considering that the welding electrodes are merely utilized in the process of repairs and maintenance of the machinery and merely because its operation is necessary in the process of manufacture of final product, that will not entitled the appellants to claim Cenvat credit in respect of the duty paid on such product. Though the Apex Court had not admitted the SEP, it cannot be said that the SLP was rejected by passing non-speaking order. The Apex Court has clearly stated that on the facts of the case the same was being dismissed. According to learned Jt. CDR, therefore, the Apex Court after taking into consideration the facts of the case and the law as stated by the Larger Bench, the same having been found to be correctly applied to the facts that the SLP was rejected. Being so, the said decision is binding upon the Tribunal. 7. Referring to the Larger Bench decision in the matter of Jaypee Rewa Plant v. CCE, Raipur reported in 2003 (159) E.L.T. 553 (Tri....
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....was revealed to the Department that it initiated proceedings. According to the learned Jt. CDR none of the documents submitted by the assessee disclosed specific use of the said welding electrodes and, therefore, in the absence thereof it can not be said that the Department was fully aware of the fact that the welding electrodes were not utilized as the inputs in the manufacture of the final product. 9. Before analysing the rival contentions in the matter, it is necessary to address to the controversy sought to be raised regarding the binding nature of the decision of the Hon'ble Rajasthan High Court in Hindustan Zinc Limited, vis-à-vis the decision of the Larger Bench of the Tribunal in Jaypee Rewa Plant (supra) read with Division Bench decision in SAIL (supra) and order of the Apex Court dismissing the S.L.P. while bearing in mind the decision of the Apex Court in Kunhayammed case (supra). 10. The Larger Bench in Jaypee Rewa Plant case while dealing with the issue as to whether Cenvat credit was admissible under Rule 57AA of the Central Excise Rules, 1944 in respect of duty paid on welding electrodes and gases oxygen and acetylene gases which were used by Jaypee ....
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....ould be granted such leave or not. While hearing such petition, the Court is not exercising its appellate jurisdiction; it is merely exercising its discretionary jurisdiction to grant or not to grant leave to appeal. The petitioner is still outside the gate of entry though aspiring to enter the appellate arena of Supreme Court. Whether he enters or not would depend on the fate of his petition for special leave; 2. If the petition seeking grant of leave to appeal is dismissed, it is an expression of opinion by the Court that a case for invoking appellate jurisdiction of the Court was not made out. 3. If leave to appeal is granted the appellate jurisdiction of the Court stands invoked; the gate for entry in appellate arena is opened. The petitioner is in and the respondent may also be called upon to face him though in an appropriate case, in spite of having granted leave to appeal, the court may dismiss the appeal without noticing the respondent. 4. In spite of a petition for special leave to appeal having been filed, the judgment, decree or order against which leave to appeal has been sought for. continues to be final, effective and binding as betwee....
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....fied that - "The statement contained in the order other than on the points of law would be binding on the parties and the court or tribunal. whose order was under challenge on the principle of judicial discipline, this Court being the Apex Court of the country. No court or tribunal or parties would have the liberty of taking or canvassing any view contrary to the one expressed by this Court. The order of Supreme Court would mean that it has declared the law and in that light the case was considered not fit for grant of leave". (Emphasis supplied) 16. Dealing with the situation where the leave is granted but the appeal is dismissed without reasons, the Apex Court has held that in such cases it will be a dismissal of appeal and in that case the decision of the Apex Court would result in substitution for the decision under challenge and would attract the doctrine of merger. 17. At this stage it would also be necessary to refer to two more decisions of the Apex Court, one in the matter of Abbal Mallgai Partnership firm and Anr. v. K. Santhakumaran reported in (1998) 7 SCC 386 which was referred to by the Apex Court in Kunhayammed case and another decision ....
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....o the subject matter of the decision, which alone has the force of law and which alone has the force of law and which, when it is clear what it was, is binding". It was also held that- "In order to understand and appreciate the binding force of a decision it is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided. No judgment can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law". 20. Bearing in mind the law laid down by the Apex Court in relation to the law of precedent, principle of ratio decidendi, the binding nature of the orders passed in the proceedings relating to the SLP before the Apex Court quoted herein above, if one reads the order passed by the Apex Court in SAIL case while dismissing the SLP, it is apparent that by no stretch of imagination it can be said that it was dismissed with a non-speaking order. The order clearly reads that the Apex Court having taken into consideration the facts of the case, found it appropriate to refrain itself from interfering with the decision arrived at by the ....
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....;ble Rajasthan High Court referred to two decisions of the Apex Court, one in the matter of Commissioner v. Jawahar Mills Ltd. reported in 2001 (132) E.L.T. 3 (S.C.) and another in the matter of J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer reported in 1997 (91) E.L.T. 34 (S.C.) (supra). With reference to the judgment of the Apex Court in Jawahar Mills Ltd. case it was observed thus- "In judgment of Hon'ble Supreme Court in Jawahar's case, it is held, that capital goods can be machines, machinery, plant equipment, apparatus, tools or appliances. Any of these goods, if used for producing, or processing of any goods, or for bringing about any change in any substance, for the manufacture of final product, would be 'capital goods', and would qualify for Modvat credit. Then as per clause-b the components, spare parts and accessories of the goods mentioned above, would also be capital goods, and would qualify for Modvat credit. Then moulds and dies, generating sets, and weigh etc. has also been held to be eligible for Modvat credit, even if they are not used for producing the final product, or used for process of any product, for the manufa....
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.... goods' within the meaning of the Rule on the ground of its user as it now sought to be urged by the leaned Counsel. The case of the Revenue is that the items in question per se are not 'Capital goods' within the meaning of capital goods as defined in Explanation 1(a)". 24. The Hon'ble Rajasthan High Court thereafter has referred to the decision of the Larger Bench in Jaypee Rewa Plant and has observed thus- "On the other hand in JP Rewa's case the eligibility of credit was denied, which was claimed as "inputs". Then so far as the claim made for Modvat credit on the basis of it being capital goods, it was denied only on the ground, that in the declaration, it was no so claimed, and the assessee has not even furnished details of any capital goods for captive consumption, to enable the adjudicating authority to ascertain, whether such goods were covered by definition of capital goods. Thus, for want of evidence to show, that any part of any electrodes, and gases, was used in the manufacture of any capital goods for captive consumption, the claim was negated". (Emphasis supplied) 25. The Hon'ble Rajasthan High Court thereafter referred to J.K.....
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....se. Obviously the decision in Jay Pee Rewa's case was distinguished by the Rajasthan High Court on the ground that the Tribunal had negated the claim for want of evidence, after relying upon the decision of the Apex Court in J.K. Cotton's case. Besides, it nowhere discloses that the decision of the Apex Court in Kunhayammed was brought to the notice of the Hon'ble Rajasthan High Court nor the fact that the order in SAIL's case was subjected to filing of SLP was disclosed. It is pertinent to note that in SAIL's case the order was passed on 17th July 2007 and it was reported in 2008 (222) E.L.T. 233. In the facts and circumstances of the case, therefore, though it cannot be said that the decision of the Hon'ble Rajasthan High Court has been overruled by the Apex Court while dismissing the SLP in SAIL's case, fact remains that the Apex Court refused to interfere in the said decision for reason disclosed in the order dismissing the SLP, and hence bearing in mind the ruling of the Apex Court in Kunhayammed read with in Dhanwanti Devi case it would be binding upon the Tribunal. Having said so, we hasten to clarify that the decision of the Hon'ble Rajasthan....
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....guise of interpretation thereof is empowered to expand the meaning of such term. If the contention on behalf of the appellants is accepted, it would virtually amount to expand the meaning of the term "input" beyond the scope prescribed under the definition clause in Rule 2(k) of the Cenvat Credit Rules, 2004. 29. It is also pertinent to note that the legislature in its wisdom has independently defined the expression capital goods under Rule 2(a) of the said rules. If the inputs were to include every product under the sun which is somehow related to the premises where the manufacturing process goes on, then there is no need to provide a definition of the term capital goods and, therefore, the acceptance of the contention on behalf of the appellants would render the definition of the term the capital goods to be redundant as well as the provisions relating to extending the benefit of Cenvat credit to the capital goods. 30. The decision in Indian Farmers Fertiliser Coop. Ltd. case rather than lending any support to the contention of the appellants, justifies the view taken by the authority below. In the said decision, the Apex Court was dealing with the scope of the exemption No....
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....observations were essentially with reference to the scope of the exemption notification. Even otherwise, the ruling was to the effect that for any activity or operation to be a process in or in relation to the manufacture, it must be so related to the whole process of manufacturing the final product and that but for such process, the manufacture of the final product would be impossible. It is nobody's case that the activity of the repair and maintenance is part of the process of the manufacture of the final product. On the contrary, the argument is that such repair and maintenance is necessary to keep the machine which manufactures the final product intact and not that the same is in any way related directly or indirectly to the process of manufacture of the final product. 32. After considering its earlier decision in CCE v. Rajasthan State Chemical Works and taking into consideration the facts of the case in Impression Prints, the Apex Court held that- 'From the above set out process it is clear that the activity of manufacturing printed bed sheets, bed covers and pillow cases starts with the screen printing and colouring. Without this activity it would not be ....
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.... and furnace oil was used for generating electricity captively consumed for manufacture of final products such as caustic soda, cement etc. It was held that the low sulphur heavy stock is used to generate electricity without which, it is not possible to manufacture cement, caustic soda etc. It was further held that without such supply, the generation of electricity was not possible and, therefore, keeping in mind the expression "used in relation to the manufacture" in Rule 57A, the assessee were entitled to avail Modvat credit on low surphur heavy stock. Evidently, therefore, since the low surphur heavy stock was utilized in the continuous process of manufacture of the final product that it was held to be the input used for manufacture of the final product. In other words, unless the material is utilized in one way or other in the mainstream of manufacturing process or in assisting the process of manufacture of the final product, it cannot be said to have been used in relation to manufacture. 35. In Tata Engineering and Locomotives Co. Ltd. case, the challenge was to the order of the Tribunal confirming the benefit under exemption Notification No. 217/86-C.E., dated 2-4-2086 to ....
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.... then a possibility of the furnace being damaged and it could result in loss of productivity. At the same time, it was also noted that there was no dispute that the items in question were inputs, then the meaning of the explanation to Rule 57, but according to the Department those items came within the excluded items as they were really used to protect machinery and not for the manufacture of ingots itself. In the background of those facts while dealing with the question as to whether those items were at all inputs in respect of the steel ingots, the Hon'ble Calcutta High Court answered the question in affirmative and while dealing with the question as to whether those items were excluded inputs, it was observed that "There can be no dispute that the items are used in relation to the manufacture of steel ingots". In that respect, reference was made to the decision of the Tribunal in Mukund Steel [1990 (45) E.L.T. 84 (Tri.-Mum.)], wherein it was held that those items were required for the manufacture of steel. Further referring to the question as to whether those items were the plant, machine, machinery, appliances etc., the same was answered in negative while holding that the c....
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....tenance of the machinery. 42. The appellants also have raised the issue of bar of limitation in the sense that in the facts and circumstances of the case, the respondent could not have invoked extended period of limitation. It is the contention on behalf of the appellants that apart from granting Cenvat credit on welding electrodes as inputs under Order-in-Original dated 5-1-2003 by the Commissioner (Appeals) in their own case the Department was fully aware that the appellants have been consistently taking such credit for the entire disputed period and being so, they had no justification to invoke the extended period of limitation on 1-5-2008 when the show cause notice came to be issued. On the other hand, it is the case of the Department that the records merely disclose that the Cenvat credit on welding electrodes have been taken but specific use of the said welding electrodes was not disclosed from the records. It is their further case that in view of the introduction of self assessment method, it was the duty of the appellants to take of precautions before taking Cenvat credit to avail the same only on admissible inputs and, therefore, there is a case of suppression of the re....
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....to the department. It is submitted that mens rea is an essential element for imposition of penalty under Section 11AC of the Act". 44. While dealing with the issue of limitation the adjudicating authority in its order held that the appellants had undoubtedly disclosed the Cenvat credit having been availed on welding electrodes but its specific use was not disclosed. It was also observed that the appellants were required to disclose those facts particularly in view of introduction of self assessment system. The order passed by the Commissioner (Appeals) merely reiterated the finding by the adjudicating authority in that regard. 45. Apparently, therefore, inspite of the fact that the assessee-appellants had raised a specific point regarding bar of limitation, the impugned orders nowhere considered this aspect in the manner it was required to be considered. Once the assessee raises the point that the extended period of limitation is not warranted in the facts and circumstances of the case, it is necessary and it is expected from the adjudicating authority to analyse the facts on record which will either disclose the suppression of the relevant facts by the assessee to the knowle....