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2023 (12) TMI 1303
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....IL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.37978 OF 2016) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.2358 OF 2017) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO. OF 2023 Arising out of C.C. NO.1960 OF 2017) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.27610 OF 2017) CIVIL APPEAL NO.18006 OF 2017 CIVIL APPEAL NO.18008 OF 2017 CIVIL APPEAL NO.18005 OF 2017 CIVIL APPEAL NO.18007 OF 2017 CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9053 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9062 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.8918 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9077 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9040 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9001 OF 2020) CIVIL APPEAL NO. OF 2023 (Arising out of SLP(C) NO.9000 OF 2020) JUDGMENT Delay condoned. Leave granted in Special Leave Petitions. 2. The question arising in this batch of civil appeals is identical i.e., whether products viz. welding electrodes, paint, varnish, MS plates, jointing sheets etc. used within the factory of the ....
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.... M/s Steel Authority of India Ltd. Vs. Commissioner of Central Excise, Jharkhand Welding electrodes, Formatic Flux/Welding Alloys, Welding Wires, Welding Flux, etc. Used for joining pipes and also for fabrication of structures. November 1996 to January 1997 Central Excise Rules, 1944 06 C.A. No. 6133 of 2012 M/s Steel Authority of India Vs. Commissioner of Central Excise, Jharkhand Paints and varnishes Used for protective painting of structures. Used in cold rolling mill/hot roll coil finishing mill. May 1996 Central Excise Rules, 1944 Welding electrodes Posithermo, thermocouple Used for welding purposes to manufacture various parts & components which were captively used for repair and maintenance of machineries. Credit denied for the reason of improper/duplicate documents for taking credit 07 C.A. No. 6135 of 2012 M/s Steel Authority of India Vs. Commissioner of Central Excise, Jharkhand Lubricating oil Used to lubricate the mill equipment installed in the factory. June 1996 Central Excise Rules, 1944 Welding electrodes Used for welding purpose to manufacture various parts & components which were capt....
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....3 to December 2007 Cenvat Credit Rules, 2002 15 C.A. No. 6142 of 2010 M/s Lloyds Metals and Engineering Ltd. Vs. Union of India and Ors. Welding electrodes, Used for repair and maintenance of machineries. April, 2006 to October 2006, November, 2006 to March, 2007 Cenvat Credit Rules, 2004 read with the Central Excise Act, 1944 16 C.A. No. 10824 of 2010 M/s Madras Cements Ltd. Vs. Commissioner of Central Excise Madurai Welding electrodes, Used for manufacture of final products, as inputs and capital goods. April, 2005 to April, 2006 Cenvat Credit Rules, 2004 17 SLP (C) No.25833 of 2015 M/s Dhampur Sugar Mills Ltd Vs. Commissioner of Central Excise, Meerut Welding electrodes Used for maintenance and repair of the machineries, as capital goods and inputs. May, 2001 to June, 2001. Cenvat Credit Rules, 2001; Central Excise Act and Rules, 1944 18 C.A. Nos. 202- 204 of 2016 M/s Monnet Sugar Ltd. Vs. Commissioner, Customs and Central Excise, Meerut - I Welding electrodes, Drimax, Magna Flock, Ranocide, DP/LDP Liner, etc. Used for maintenance and repair of the machinery. July, 2004 to December, 2004; January, 2005 to March, 2....
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....n the factory, as inputs. July, 2006 to February, 2007. Cenvat Credit Rules, 2004 26 SLP (C) No.27610 of 2017 Avadh Sugar and Energy Ltd Vs. Commissioner of Central Excise, Lucknow Welding electrodes, Used as capital goods as well as inputs as essential components of the machinery used in the manufacturing of sugar. February, 2000 to March, 2000; and March, 2007 to September , 2007 Cenvat Credit Rules, 2004 27 C.A. No.18006 of 2017 M/s Manikgarh Cement Vs. The Commissioner of Customs and Central Excise Welding electrodes, welding wire and sweet on paste Used for the repair and maintenance of capital goods. July, 2001 to December, 2001. Cenvat Credit Rules, 2001 28 C.A. No.18008 of 2017 M/s Manikgarh Cement Vs. Commissioner of Central Excise Welding electrodes, welding wire and sweet on paste Used for repairing and maintenance of capital goods (for rebuilding, refurbishing at the table liners/tyres, rollers, etc. of the raw mill, coal mill, cement mills and kiln in its cement plant). September and October, 2005 Cenvat Credit Rules, 2001/2004 29 C.A. No.18005 of 2017 M/s Manikgarh Cement Vs. The Commissioner of C....
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....tral Excise Noida Steel material, tubes, pipes and welding electrodes Used in repair and maintenance of plant and machinery. October 2007 to August 2016 Cenvat Credit Rules, 2004 4. We have heard learned counsel on behalf of the appellants/assessees and learned Additional Solicitor General Mr. N. Venkataraman and learned counsel on behalf of the revenue. 5. Since the question arising in this batch of Civil Appeals are common, we shall deal with Civil Appeal No.2445 of 2007 as a representative case. Submissions on behalf of the Assessee 6. Ms. Charanya Lakshmikumaran, learned advocate appearing for the assessee - SAIL leading the arguments on behalf of the appellants submitted that Modvat Credit Scheme was introduced in the month of March 1986 with a clear intention to avoid cascading effect of taxation. It allowed credit on items used in or in relation to the manufacture of finished goods in the factory. The Scheme also incorporated provisions relating to reversal of credit on such items which are used in the manufacture of exempted finished goods. 7. Ms. Lakshmikumaran has bestowed our attention to the history of certain provisions of the Central Excise Rul....
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....her directly or indirectly and whether contained physically in the final product or not" are added after the existing words 'used in or in relation to the manufacture of the said final products' in Rule 57A." c) The Rekhi Committee proposed that in order to end unnecessary controversies, the rule itself should clearly say that no one-to-one co-relation would be required to be established between inputs and outputs. Consequently, vide Central Excise (Ninth Amendment) Rules 1995, Rule 57A of Central Excise Rules 1944 was further amended as under: "2. In the Central Excise Rules, 1944 (hereinafter referred to as the said rules), in rule 57A, - (i) in sub-rule (1), after the words "goods used in or in relation to the manufacture of the said final products", the following shall be inserted, namely :- "whether directly or indirectly and whether contained in the final product or not"; (ii) in the explanation to sub-rule (1), after clause (d) and before the portion "but does not include --" the following shall be inserted, namely :- "(e) accessories of the final product cleared alongwith such final product, the value of which is included in t....
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....cation, but are contained in the said final products. Explanation.-For the purposes of the sub-rule, it is clarified that even if the declared inputs are used directly by a manufacturer of final products, the credit of the declared duty shall, notwithstanding the actual amount of duty paid on such declared inputs, be deemed to be equivalent to the amount specified in the said notification and the credit of the declared duty shall be allowed to such manufacturer." (emphasis supplied) e) That post 01.03.1997, the substituted Rule 57B of the Central Excise Rules, 1944 that pertained to eligibility of credit provided as under: "57B. Eligibility of Credit of duty on certain goods. (1) Notwithstanding anything contained in rule 57A, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the following (inputs), used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final products or not, namely:- (i) inputs which are manufactured and used within the factory of production; (ii) paints; (iii) inputs used as fuel; (iv) inputs use....
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....red along 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 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 supplied) i) Further on 01.03.2002, the Cenvat Credit Rules, 2002 were introduced under which the definition of input under Rule 2(g) reads as follows: "Rule 2(g) -"inputs" means all goods, except light diesel oil, high speed diesel and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of ele....
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....ted bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods;" (emphasis supplied) l) Further, the definition of input, i.e. Rule 2(k) of Cenvat Credit Rules, 2004 was recast in 2011 in the following manner w.e.f. 01.04.2011: "(k) "input'' means - (i) all goods used in the factory by the manufacturer of the final product; or (ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or (iii) all goods used for generation of electricity or steam for captive use; or (iv) all goods used for providing any output service; but excludes- (A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) any goods used for- (a) construction of a building or a civil structure of a part thereof; or (b) Laying of foundation or making of structures for support of capital goods; except for the provision of any taxable service sp....
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....Court vide judgment in Indian Farmers Fertilizer Cooperative Limited vs. Collector of Central Excise, Ahmedabad, (1996) 5 SCC 488, overruled the aforesaid order of Tribunal. This Court further held that Ammonia used in the effluent treatment plant being essential and integral part of manufacturing is covered under condition of "used elsewhere in the manufacture of fertilizer" to allow exemption. 11. In view of the above, this Court reversed the order of the Tribunal that ammonia used for maintenance of water treatment plant is also used in relation to manufacture of finished goods. Therefore, the items used for maintenance are also items used in the manufacture of finished goods. 12. Learned counsel further relied upon pertinent decisions relating to the issue of eligibility of credit on welding electrode used for maintenance of capital goods/machinery in the factory as under: a) In Ramala Sahkari Chini Mills Ltd. vs. Commissioner, Central Excise, Meerut-I, (2010) 14 SCC 744, the question of law which arose was whether welding electrode used in the maintenance of machines is eligible for credit as 'inputs' under the Cenvat Credit Rules, 2002. This Court referred the ....
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....Cement (D.B. Civil Central Excise Appeal No. 5 of 2005, decided on 8.11.2005) allowed credit on various goods such as MS/SS plates used for repair and maintenance of machinery. It clearly held that without proper up-keep and maintenance, the principal plant and machinery cannot function properly. The SLP filed by the Union of India against this judgment was dismissed by this Court on 06.11.2006 in SLP (Civil) No.18641 of 2006 13. It was submitted that the aforesaid expression "inputs used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final products or not" continued to exist in the definition of inputs throughout the Modvat and Cenvat Schemes under the Cenvat Credit Rules of 2001, 2002 and 2004. The disputed products on which credit has been denied in the present batch of matters are 'used in or in relation to' the manufacture of the final product and therefore covered under the definition of inputs. These inputs on which credit has been denied are also undisputedly used within the factory of production. It is pertinent to note that without proper maintenance of various capital goods for which dispute....
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....d above from time to time under the relevant rules, we find that the expression "used in or in relation to manufacture" must be given an expansive interpretation and not a narrow or myopic one. 18. Learned counsel referred to a series of decisions of this Court as under to buttress her submission that the expression "used in or in relation to manufacture" is of a very wide ambit and has to be interpreted in a broad manner. a) In J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs. Sales Tax Officer, Kanpur, (1965) 1 SCR 900, a three judge Bench of this Court held that drawings, photographic materials and electricals are used in the manufacture of goods. 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 also held that where any particular process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the said process or activity would, fall within the expression "in the manufacture of goods". T....
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....n such explosives is available. It was held that indirect use of inputs towards the manufacture of final products cannot be a ground to deny of credit on inputs.: i) This Court held that plaster of paris used in the manufacture of moulds which are in turn used in the manufacture of sanitaryware is used in or relation to manufacture of sanitaryware in Collector of Central Excise, New Delhi vs. Hindustan Sanitaryware & Industries, 2002 (145) ELT 3 (SC). j) In Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd., 2003 (154) ELT 321 (SC), this Court held that ramming mass, fibre glass and filter mesh used to line the furnaces to neutralise the effect of acidic vapours produced during the course of melting steel is used in or in relation to manufacture of steel. k) In Jayaswal Neco Ltd. vs. Commissioner of Central Excise, 2015 (319) ELT 247 (SC), this Court held that credit on railway track material used for handling the material within the factory is available as the same is essential for the manufacture of finished goods. Hence, credit on railway track material is available. In view of the aforesaid settled legal position, the interpretation of the ....