Custom, Excise & Service Tax Tribunal
M/S. Kisan Cooperative Sugar Factory ... vs C.C.E., Meerut-I on 3 June, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
COURT NO. IV
Date of Hearing: 03.06.13
Date of Decision:
E/2874/2007-EX[SM]
M/s. Kisan Cooperative Sugar Factory Ltd. Appellant
Vs.
C.C.E., Meerut-I Respondent
[Arising out of the Order-in-Appeal No.151-CE/MRT-I/2007 dated 30.10.2006, passed by the Commissioner (Appeals) Custom & Central Excise, Meerut-I].
Honble Shri Rakesh Kumar, Member (Technical)
1. Whether Press Reporters may be allowed to see the :
Order for publication as per Rule 27 of the CESTAT (Procedure) Rule, 1982?
2. Whether it would be released under Rule 27 of :
the CESTAT (procedure) Rule, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair :
Copy of the order?
4. Whether order is to be circulated to the Department :
Authorities?
Present: Sh. Parkash Singh, Advocate - for the appellant Sh. V.P.Batra, DR - for the Respondent Coram: Rakesh Kumar Member (Technical) Final Order No.56506/2013 Per Rakesh Kumar:-
The appellant are a manufacturer of sugar and molasses chargeable to Central Excise duty. The dispute in this case is as to whether during Nov. 2004 to Sept. 2005 period, welding electrodes used for repair and maintenance of plant and machinery, are eligible for Cenvat Credit or not. The Jurisdictional Assistant Commissioner vide order-in-original dtd. 30.10.2006 denied the Cenvat Credit on the welding electrodes and confirmed the Cenvat Credit demand of Rs. 72,434/- along with interest and also imposed of penalty of Rs.10,000/- on the appellant. On appeal to Commissioner (Appeals), the above order of the Assistant Commissioner was upheld vide order-in-appeal dtd. 30.7.2007 against which this appeal has been filed.
2. Head both the sides.
3. Sh. Prakash Singh, ld. counsel for the appellant, pleaded that welding electrodes, in question, were used for repair and maintenance of plant and machinery of sugar mill, that regular repair and maintenance of pant and machinery is necessary for smooth manufacturing operation, that Honble Chhattisgarh High Court in case of Ambuja Cement Eastern reported in 2010 (256) ELT-690 and Honble Rajasthan High Court in case of Hindustan Zinc Ltd., reported In 2008(228) ELT-517 (Raj.) and Honble Karnataka High Court in case of Alfred Herbert (India) Ltd. Vs. Commissioner of Central Excise, Bangalore-I reported in 2010(257) ELT-29(Kar.) have held that welding electrodes used for repair and maintenance for plant and machinery are eligible for Cenvat Credit and that in view of this, the impugned order upholding the denial of the Cenvat Credit in respect of this items which is essential for smooth manufacturing operations, is not correct.
4. Sh. V.P.Batra, Ld. departmental representative, defended the impugned order by reiterating the findings of Commissioner (Appeals) and pleaded that the Tribunal in the case of the SAIL Vs. Commissioner of Central Excise, Ranchi reported in 2008 (222) ELT-233 (Tri. Kolkata) has held that welding electrodes used for repair and maintenance of plant and machinery are not eligible for Cenvat Credit, that SLP filed by SAIL against this order of the Tribunal was dismissed by Apex Court vide judgment reported in 2002(139) ELT A-294 (SC). that Apex Courts order would be binding on the Tribunal, that the same view has been taken by Honble Andhra Pradesh High Court in the case of Sree Rayalaseema Hi-Strength Hypo Ltd. Vs. Commissioner of Custom & Central Excise, Tirupati reported in 2012(278) ELT-167(A.P.) observing that repair and maintenance is an activity distinct from manufacture, that Apex Court in the case of Grasim Industries Ltd. Vs. Union of India reported in 2011(273) ELT-10(SC) has also held that scrap or waste arising from repair & maintenance of plant and machinery is not excisable as the same is neither by product nor the final product or subsidiary product, as repair and maintenance activity is not manufacture, and that in view of this, any item used for repair and maintenance of plant and machinery can not be treated as having been used in manufacture of final product and would not be eligible for Cenvat Credit. He, therefore, pleaded that there is no infirmity in the impugned order.
5. I have considered the submissions from both the sides and perused the records. There is no dispute that the welding electrodes in question, have been used for repair & maintenance of plant and machinery. It is also not disputed that regular repair & maintenance of plant and machinery of a Sugar Mills is an essential activity.
6. The definition of input during the period of dispute, as given in Rule 2 (k) of the Cenvat Credit Rules2004, covered- all the goods which are used in or in relation to manufacture of final products whether directly or indirectly and whether contained in the final product or not. The expression used in or in relation to manufacture of final products whether directly or indirectly is obviously wider in scope than expression used in the manufacture of, as the expression in or in relation to expands scope of the expression used in the manufacture of. Apex Court in the case of J.K.Cotton Spinning & Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanapur reported in 1997(91) ELT-34 (SC) while interpreting the scope of the expression used in the manufacture of in Section 8(3)(b) of the Central Sales Tax Act, 1956, has held as under.
In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process of activity manufacture may, even if theoretically possible, be commercially in-expedient, goods intended for use in the process or activity, as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods used in connection with manufacture or in relation to manufacture or which facilitates the conduct of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Court in which it was held that vehicles used by a company (which mined ore and turned out copper in carrying an activities as a miner and as a manufacturer) fell within Rule 13, even if the vehicles were used merely for removing ore from to the mines to the factory, and finished goods from the factory to the place of storage. Spare parts and accessories required for effective operation of those vehicles were also held to fall within Rule 13, See Indian Copper Corporation Ltd. Vs. Commissioner of Commercial Taxes, Bihar CA No. 1021 of 1969 dt. 19.10.1964.
Thus, in term of the above judgment of the Apex Court the goods used in an activity, without which manufacturing, operations, though theoretically possible, are not commercially feasible, have to be treated as ,used in the manufacture of the final products.
6.1 When the Apex Court has interpreted the expression used in manufacture in the above manner, the scope of the expression used in or in relation to manufacture whether directly or indirectly would be much wider. The Honble Calcutta High Court in case of Singh Alloys & Steel Ltd. Vs. Assistant Collector of Central Excise reported in 19993(66) ELT-594(Cal.) has held that the definition of input does not depend on what ought to be used but what is commercially expedient to use and the expression in relation to used in Explanation to Rule 57A of Central Excise Rules, 1944 has a wide connotation. Therefore, in my view for determining the eligibility of a particular item for Cenvat Credit, what has to be seen is as to whether without use of that item or without the activity in which that item is used, the manufacture of final product, though theoretically feasible. is commercially expedient or possible or not. It is nobodys case that manufacturing activity is commercially feasible with malfunctioning machinery, and leaking pipes, tubes and tanks. Therefore repair and maintenance of plant and machinery, though by itself not a manufacturing activity, has to be treated as an activity in relation to manufacture and inputs used in repair & maintenance would have to be treated as goods used in relation to manufacture.
7. Moreover I find that Honble Chhattisgarh High Court in case of Ambuja Cement Eastern Ltd. (Supra) has held that welding electrodes used for repair and maintenance of plant and machinery eligible for Cenvat Credit. In this case Honble Chhattisgarh High Court has also discussed the judgment of Tribunal in the case of M/s. Steel Authority of India Ltd. Vs. Commissioner of Central Excise, Ranchi reported in 2008(222) ELT-233 (Tri. Kolkata) the SLP filed by SAIL against which has been dismissed by the Apex Court and has observed that mere dismissal of SLP without giving any reason does not lay down any law. Honble Rajasthan High Court in case of Hindustan Zinc Ltd. reported in 2008(228) ELT-517 (Raj.) and Honble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in 2010(257) ELT-29 (Kar) has also held that the goods used for repair & maintenance of plant and machinery are eligible for Cenvat Credit.
8. Though Apex Court in case of Grasim Industries Ltd. reported in 2011 (273) ELT- 10 (SC) has held that repair & maintenance of machinery is not manufacture and therefore steal scrap, arising in course of the said activity is not excisable, this judgment does not help the Department, as for determining the eligibility for Cenvat Credit of an item used in an activity, what is relevant is as to whether without that activity in which the item, in question, is used, manufacturing operation are commercially feasible, and it is not relevant as to whether that activity by itself amounts manufacturer. In the case of Sree Rayalaseema Hi-Strength Hypo Ltd. reported in 2012(278) ELT-167(A.P.) decided by Honble Andhra Pradesh High Court, the point as to whether regular repair & maintenance of the plant and machinery by using welding electrodes manufacturing operating, were commercially feasible had not been considered. In any case, when three other high courts as mentioned above have held that welding electrodes used for repair and maintenance of plant and machinery are eligible for Cenvat Credit, it is these judgments which will hold the field.
9. In view of the above discussion I hold that impugned order is not sustainable. The same is set aside. The appeal is allowed.
(Order dictated in the open court) (Rakesh Kumar) Member (Technical) S.Kaur ??
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