TaxTMI 
TaxTMI 
2006 (12) TMI 342
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....ement Companies Limited v. CCE, Balgaon, reported in 1999 (108) E.L.T. 477 (Tri.) in support of its claim. 3. Show cause notices dated 5-3-2004 were issued on the appellant on the ground that the appellant appear to have wrongly availed credit amounting to Rs. 11,861/- during the period February 2003 to March 2003 and Rs. 97,420/- during the period February 2003 to December 2003 under Rule 3 of the Cenvat Credit Rules, 2002. It was alleged in the show cause notice that the said oxygen and acetylene gases, falling under chapter sub-headings 2804.19 and 2901.10 respectively of the Excise Tariff Act, were used in repairing of their plant and not in relation to manufacture of cement or clinker. According to the Revenue, such use was not covered under the definition of "inputs" under Rule 2(g) of the said rules. Recovery of the said credit wrongly taken with imposition of penalty and charging of interest was proposed in the show cause notices. 4. The Deputy Commissioner on the basis of the material on record held that these gases were used in relation to repairing of capital goods as was clearly admitted by the assessee itself in its reply and not in relation to the manufact....
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....se of the device intended by the manufacturer of the device. The learned Counsel argued that in view of the said explanation 2 to Rule 2(g) of the Cenvat Credit Rules, 2002 which came into force from 1-3-2001, the decision of the Larger Bench in Jaypee Rewa Plant (supra) will not apply because the period therein covered was prior to the coming into force of the said explanation 2. He also submitted that the decision of the larger bench in Jaypee Rewa Plant (supra) was overruled in view of the later decision of the division bench of the Tribunal in India Sugars and Refineries Ltd. v. CCE, Bangalore reported in 2006 (205) E.L.T. 717 (T) = 2006 (74) RLT 61 (CESTAT Bangalore), in which the division bench observed in paragraph 4 that the Larger Bench had not taken into consideration the decision of the earlier Larger Bench in Modi Rubber Ltd., 2000 (119) E.L.T. 197 (Tri.-LB) rendered in the context of the lubricant oil. It was held that the Larger Bench in Jaypee Rewa Plant should have adopted the reasoning of the earlier Larger Bench. It was submitted that the division bench had categorically held that the ruling in Jaypee Rewa Plant was not a good law and, therefore, the Larger Bench ....
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....ed in 2005 (187) E.L.T. 145 (S.C.). (v) CCE, Bhopal v. Finite Polymers reported in 2003 (153) E.L.T. 502 (S.C.). (vi) Canon India Pvt. Ltd. v. CCE, Meerut reported in 2002 (144) E.L.T. 143 (Tri-Del.). (vii) Manikgarh Cement Ltd. v. CCE, Nagpur reported in 2004 (168) E.L.T. 331 (Tri.- Mumbai). 7. The learned authorized representative for the department submitted that admittedly these gases were used for repairs of the plant and were not used in relation to manufacture of the final product by the appellant. The claim was made by the appellant in respect of these goods for their use only as an input and not as capital goods. She submitted that accessories were capital goods and were not used in the manufacture of the final product. It was argued that gases were not used for manufacture of welding machines because no welding machines were manufactured by the appellant and therefore, they cannot be considered to be 'input' even within the meaning of explanation 2 to Rule 2(g) of the Cenvat Rules. She further contended that the Larger Bench decision in Jaypee Rewa Plant (supra) which concluded the issue in favour of the revenue could not have been overruled by the divi....
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....i reported in 2003 (153) E.L.T. 686 (Tri.-LB) = 2003 (56) RLT 152 (CEGAT-LB), was cited for the proposition a two Member Bench has to refer the case to a three Member only, even if it feels that the earlier judgment of three Members is incorrect and that if the three Members bench disagrees with the earlier judgment it has to refer the matter to a Bench of five Members. The Tribunal relied upon the decision of the Hon'ble the Supreme Court in Pradip Chandra Parija (supra). (iii) The decision of the Larger Bench in Triveni Engg. & Industries Ltd. v. Commissioner of C.Ex., Meerut reported in 2005 (186) E.L.T. 158 (Tri.-LB), was cited for pointing out that welding electrodes used in maintenance of capital goods were held to be not entitled for benefit of Modvat credit, as goods used for maintenance were not covered under Rule 57Q of the Rules of 1944. (iv) The decision of the Hon'ble Supreme Court in Tecumesh Products India Limited v. CCE, Hyderabad reported in 2004 (167) E.L.T. 498 (S.C.), was cited for the proposition that the repair/recondition or remake in the process of repairs would not amount to manufacture. (v) The decision of....
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....ng with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production. Explanation 1. - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. - Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture;" (Emphasis added) 9. As per explanation 2, on which heavy reliance has been placed on behalf of the appellant, inputs would include goods used in the manufacture of capital goods which are further used in the factory of the manufacture. This expression, therefore, clearly postulates manufacture of capital goods for qualifying the goods used in such manufacture of capital goods which are further used in the factory, to be 'inputs'. In the present case, it was tried to be argued that these gases were used as accessories of the welding machines and, th....
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.... Court held that the expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer, of converting raw materials into finished goods. It was held that 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, goods required in that process would fall within the expression, "in the manufacture of goods". It was held by the Larger Bench that in view of the said decision of the Hon'ble Supreme Court goods used in any particular activity in the course of the entire process of converting raw materials into finished goods would be held to have been used in the manufacture of goods. It was further held that repairs and maintenance of machinery were not normally done when the process of manufacture of goods with such machinery is underway. They are not a part of, or integrally connected with, the process of manufacture of final products. It was in terms held that, welding electrodes and gases used by the appellants for repairs and maintenance of machinery cannot be considered to have been used in relation to the....
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....s not proper for a Division Bench to seek a reference to a Larger Bench of more than three Members. This decision and the Hon'ble Supreme Court's decision in Pradeep Chandra Parija case were clearly binding on the Division Bench, that decided India Sugars and Refineries Ltd., (supra). 11.1 In India Sugars and Refineries Ltd., (supra), the Division Bench in paragraph 4 of the judgment held: "On a careful consideration of submissions made by both the sides and on perusal of the entire judgment, it is seen from the Larger Bench judgment rendered in the case of Jaypee Rewa Plant v. CCE, Raipur (supra) that the Larger Bench 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". The aforesaid reading by the Division Bench, of the judgment of the Larger Bench in Jaypee Rewa Plant, with respect, is mistaken because the argument of the party in their reply has been taken as if it was a finding of the Tribunal. This is clear from paragraph 5 of the decision in Jaypee Rewa Plant (supra) in which it was held as under :- "5. The party had, in their reply, submitted that ....
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....ng should have been adopted (by the Larger Bench) in Jaypee Rewa Plant". With utmost respect, it may not be open for a Division Bench to advise as to what the Larger Bench ought to have considered. Moreover, it is evident that the decision in Modi Rubber Ltd., was in the context of lubricants used in the machinery for smooth process of manufacture of final products and had no relevance with gases which are used for maintenance and repair of machinery. 11.3 The Division Bench then proceeded to observe: "We have to see as to whether the ruling of Jaypee Rewa Plant (of the Larger Bench) is a good law or not". In paragraph 5 of its judgment the Division Bench held that ".....the Large Bench ruling of Union Carbide India Ltd. v. CCE - 1996 (86) E.L.T. 613 (T) and the Larger Bench judgment in CCE, Meerut-I v. Modi Rubber Ltd. - 2000 (119) E.L.T. 197 (Tri-LB), having been rendered in the light of the Apex Court judgment and the definition of term 'input', the ratio of these rulings "clearly overrules the Larger Bench judgment of Jaypee Rewa Plant". The Division Bench held that the inputs of Welding Electrodes, Oxygen Gas and Acetylene Gas used for welding the punctured pipes carryin....
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....is a good law or not". 12. As a single Member I feel bound myself to follow the decision of the Larger Bench which could not have been declared as overruled by the Division Bench since its ratio was not directly under consideration before any higher forum. Moreover, the decision was accepted by the parties and does not appear to have been challenged and therefore, there was no question of its reversal. When the Hon'ble Supreme Court has in no uncertain terms, laid down that judicial discipline and propriety demands that a Bench of two learned Judges should follow a decision of a Bench of three learned Judges and when the same ratio has been reiterated by a Larger Bench of this Tribunal in Mira Silk Mills, it would not be open for this Single Member Bench to question the correctness of the decision of the Larger Bench the ratio of which, with respect, appears to be sound, besides being binding on the single Member, and to prefer a contrary decision of the Division Bench in India Sugars and Refineries Limited. In fact, there can be no question of any conflict between the decision of the Larger Bench and a contrary decision of the Division Bench and obviously the Larger Bench de....