Custom, Excise & Service Tax Tribunal
M/S Ultratech Cement Ltd vs Commissioner Of Central Excise, ... on 6 February, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/1981 & 1982/10 & E/91/12 (Arising out of Order-in-Appeal No. P-III/VM/192/93/2010 dated 18.8.2010 passed by the Commissioner of Central Excise (Appeals), Pune-III). For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Ultratech Cement Ltd. Appellant Vs. Commissioner of Central Excise, Pune-III Respondent Appearance: Shri Rajesh Ostwal, C.A. for Appellant Shri Ashutosh Nath, AC (AR) for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 06.02.2015 Date of Decision: 06.02.2015 ORDER NO. Per: Shri Anil Choudhary
The issue involved in these appeals is as to whether the welding electrodes used in the maintenance of machine etc., the CENVAT Credit on the same is allowable or not?
2. Vide the impugned order dated 18.8.2010, the learned Commissioner (Appeals) in the appeal of the appellant, which is a cement manufacturer, relying on the ruling of the Hon'ble Apex Court in the case of Steel Authority of India Ltd. Vs. Commissioner 2008 (229) ELT A127 (SC) observed that the Hon'ble Supreme Court has upheld the Tribunals decision in the case of Jaypee Rewa Plant Vs. Commissioner of Central Excise, Raipur 2003 (159) ELT 553 (Tri-LB), wherein it was held that welding material used for repairs and maintenance of machinery are not eligible for CENVAT Credit as they are not used co-extensively with process of manufacture of final product and accordingly, it was held that the appellant is not entitled to CENVAT Credit on welding electrodes used in the maintenance of capital goods and machinery in plants. Being aggrieved, the appellant assessee is in appeal before this Tribunal.
3. There being common point of law and different period, the appeals are taken up together for sake of convenience.
4. It is noticed that the relevant provision i.e. Rule 2(k) of Cenvat Credit Rules, the inputs were identified as follows: -
"input" means-
(i) all goods, except light diesel oil, high speed diesel oil 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 electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
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.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated 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;
5. The learned Counsel for the appellant urges that from a plain reading of the definition, inasmuch as it provides that input means all goods used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not qualifies as inputs. He further stated that this is evident, as the definition states that input includes items like, 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 electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production. He further points out from Explanation-II, wherein it is stated that input includes goods used in the manufacture of capital goods which are further used in the factory of manufacture.
5.1 The appellant further states that ruling of the Jaypee Rewa Plant (supra) has been overruled by the Hon'ble Rajasthan High Court in the case of Hindustan Zinc Ltd. Vs. Union of India 2008 (228) ELT 517 (Raj.), wherein the welding electrodes were used for maintenance of plant and machinery. The Hon'ble High Court examined the Larger Benchs ruling in Jaypee Rewa Plant (supra) and also examined the ruling of the Hon'ble Apex Court in the case of Commissioner Vs. Jawahar Mills Ltd. 2001 (132) ELT 3 (SC) and J.K. Cotton Spinning & Weaving Mills Co. Ltd. Vs. Sales Tax Officer 1997 (91) ELT 34 (SC) and have observed that judgment of the Hon'ble Supreme Court in the case of J.K. Cotton Spinning & Weaving Mills (supra) has a material bearing on the controversy involved in the case before it. It was further noticed that Larger Bench of this Tribunal in the case of Jaypee Rewa case has referred to judgment in the case of J.K. Cottons case, by reproducing a part of the head note, but then, the very significant continuing next sentence has been omitted from consideration, inasmuch as the sentence following the portion quoted by the Tribunal (left out) is as under: -
They need not be ingredients or commodities used in the processes, nor must they be directly and actually needed for turning out or the creation of goods. The Hon'ble High Court further observed that the Hon'ble Supreme Court even went to the extent of holding, that use of electrical equipments, like lighting, electrical humidifiers, exhaust fan etc. were also taken to be necessary equipment, to effectively carrying on the manufacturing process. Thus, the Hon'ble High Court found it appropriate on appreciation of the judgment in the case JK Cottons case that it is clear from the expression in the manufacture of goods should normally encompass entire process carried on by the dealer, of converting raw materials into finished goods, where any particular process or activity, is so integrally connected with the ultimate production of the goods, but for that process, manufacturing or processing of the goods would be commercially inexpedient, goods required in that process would, fall within expression in the manufacturing of goods. Thus, overruling judgment of Jyapee Rewa Plant, the Hon'ble Rajasthan High Court following the spirit of law, laid down in J.K Cottons case, answered the question in favour of the assessee and against the Revenue.
5.2 The learned Counsel further relies on the ruling of the Hon'ble Rajasthan High Court in the case of UOI Vs. Hindustan Zinc Ltd. 2007 (214) ELT 510 (Raj), wherein the question involved was whether the Tribunal was right in law in allowing the Modvat credit on the item MS/SS plates in the maintenance and repair work of the machinery. The Hon'ble High Court has observed that such MS/SS plates are necessary for carrying out repairs and up-keeping of machinery directly involved in the manufacturing of the end products and accordingly held to be eligible for Modvat credit. Against the said ruling, the Revenue had gone in SLP before the Hon'ble Apex Court and by order dated 6.11.2006, the SLP was dismissed reported at 2007 (214) ELT A115 (SC).
5.3 The learned Counsel further urges that following the law laid down by the Hon'ble Rajasthan High Court in the case of Hindustan Zinc Ltd. (supra), the Hon'ble Chhattisgarh High Court has also in the similar facts and circumstances overruled the Larger Benchs decision of the Tribunal in the case of Jaypee Rewa case and has held that the assessee is entitled to avail CENVAT Credit on the welding electrodes used in repair and maintenance of plant and machinery. Accordingly, the appellant prays for allowing the appeal.
6. The learned AR relies on the impugned order. He further urges that the Hon'ble Bombay High Court in the case of Lloyd Metals & Engineers Ltd. Vs. Union of India 2010 (252) ELT 355 (Bom), considered the similar question involving the welding electrodes used in repair and maintenance of capital goods and availing CENVAT Credit on the same, have upheld the disallowance of CENVAT Credit in favour of the Revenue. The learned AR also relies on the ruling of Hon'ble Andhra Pradesh High Court in the case of Sree Rayalaseema Hi-Strength Hypo Ltd. Vs. Commissioner of Central Excise, Tirupati 2012 (278) ELT 167 (AP), wherein similar question of welding electrodes used for repair and maintenance of plant and machinery was involved during the period 1.6.2003 to 31.6.2008. After taking notice of the definition of input under Rule 2(k) of the Cenvat Credit Rules, 2004 and examining the ruling in the case of Hindustan Zinc Ltd. of Hon'ble Rajasthan High Court and Jaypee Rewa plant of Larger Bench of this Tribunal, observed that they are not inclined to agree with the submission of the assessee as the second explanation to the definition of input under Rule 2(k) of the Cenvat Credit Rules puts it beyond doubt that unless the goods are used in the manufacture of capital goods, which are thereafter used in the factory, they do not qualify as inputs. Repair and maintenance being distinct from manufacture, CENVAT Credit cannot be claimed under Rule 2(k) of the Cenvat Credit Rules, 2004 on the duty paid on welding electrodes used for repair and maintenance of machinery. Accordingly, he prays for dismissing of the appeal.
7. Having considered the rival contentions, we find that from very plain reading of the definition of input as given under Rule 2(k), it is evident that even goods used in relation to, directly or indirectly, in the process of manufacture like, lubricating oils, greases, cutting oils, coolants, accessories of the final products, qualify as input for the purpose of manufacture of the end product. It is undisputed fact that without the use of machinery, there cannot be manufacture, unless the machinery is in ready condition i.e. ready for use, no manufacture of cement can take place. Accordingly, the welding electrodes used for repair and maintenance of plant and machinery are indirectly used in manufacture of cement. Accordingly, I hold that the same qualifies for definition of input and the assessee is entitled to take CENVAT Credit on the same. I rely on the ruling of the Hon'ble Rajasthan High Court in the case of Hindustan Zinc Ltd. (supra), which was affirmed by the Hon'ble Supreme Court. So far the ruling relied upon by the Revenue is concerned, in the case of Lloyd Metals & Engineers (supra), I find that Hon'ble High Court has not examined the definition of input in detail and accordingly the said ruling does not lead any binding precedent. So far the ruling of the Hon'ble Andhra Pradesh High Court in concerned, in the case of Sree Rayalaseema Hi-Strength (supra), I respectfully disagree with the observation of the Hon'ble High Court in view of my finding and observation made herein above. I find that manufacture of the capital goods and their repair and maintenance are synonymous terms which are required for manufacture of the end product. It is evident from the definition of input that whatever is used and assists in the process of manufacture, qualify as inputs within the meaning of input under Rule 2(k).
8. Thus, the appeal is allowed with consequential relief, if any. The impugned order is set aside.
(Dictated and pronounced in Court) (Anil Choudhary) Member (Judicial) Sinha 1