Custom, Excise & Service Tax Tribunal
Cce, Belgaum vs No.382/2004-Ce Dt.9.9.2004 on 27 June, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: Sl. No. Appeal No. Appellant Respondent
OIA No. 1 E/1381/2004 M/s. Rajashree Cement CCE, Belgaum No.382/2004-CE dt.9.9.2004 2 E/26427/2013 M/s. UltraTech Cement Ltd.
CCE, Mangalore No.19/2013/BM dt.5.2.2013 3 E/3181/2012 M/s. The West Coast Paper Mills Ltd.
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No.442/2012 dt.12.9.2012 4 E/27293/2013
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No.MLR-EXCUS-000-DIV-III-APP-BRC-014-13-14 dt.17.6.2013 5 E/1542/2010
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No.168/2010 dt.11.5.2010 6 E/21499/2015 Ployformalin Ltd.
CCE, Cochin No.COC-EXCUS-000-APP-035-15-16 dt. 13.5.2015 7 E/20002/2015 M/s. Fitwel Tools and Forgings Pvt. Ltd.
CCE, Bangalore No.595/2014-CE dt.30.9.2014 8 E/20009/2015
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No.594/2014-CE dt.30.9.2014 [Arising out of Order-in-Appeal No. as mentioned above in the table.] Appearance:
Shri G. Shivadass, Advocate (for appellants at Sl. No.1,2) Mrs. Rukmani Menon,Advocate (for appellants at Sl No.3,4,5) Mr. P. Sateeshan, Consultant (for appellant at Sl. No.6) Mr. M. A. Narayana (for appellant at Sl. No. 7 & 8) For the Appellant Dr. Ezhilmathi, AR & Shri N. Jagadish, AR For the Respondent Date of Hearing: 19.06.2017 Date of Decision: 27.06.2017 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. _20977 - 20984 / 2017 Per : S.S GARG These appeals are directed against various impugned orders passed by the Commissioner (A) whereby the Commissioner (A) has denied the CENVAT credit on welding electrodes used directly or indirectly in relation to manufacture of final product and in certain cases the Commissioner (A) has rejected the CENVAT credit on manufacture of pig iron which are further used for repair and maintenance of plant and machinery.
2. For the sake of convenience, the facts of the case in appeal No. E/1381/2004 are taken. Briefly the facts of the case are that the appellants are engaged in the manufacture of clinker and cement falling under Chapter 25. They have availed credit of Rs.18,07,940/- on different types of inputs such as chemicals, steel items, lubricants, greases, nuts and bolts, electrodes and DA gas, oxygen, etc., during various months in the year 1996-97 and 1998 and have availed MODVAT credit on these items. Thereafter, show-cause notices were issued proposing to deny the said credit on these inputs. The Assistant Commissioner vide the Order-in-Original dated 7.6.1999 allowed MODVAT credit for Rs.3,55,150/- on hydrochloric acid, oxygen, caustic soda, and dissolved acetylene gas and disallowed credit on other inputs. Aggrieved by the said order, appellant filed appeal before the Commissioner (A) and the Commissioner (A) vide order dated 14.12.2001 set aside the Order-in-Original and allowed the appeal. Against the Order-in-Appeal, the Revenue filed appeal before the CESTAT and CESTAT remanded the case back to the Commissioner (A) for decision after examining the use of each item and thereafter the Commissioner (A) has passed the impugned order and aggrieved by the said order, the appellant is before this Tribunal.
3. Heard both the parties and perused the material on record.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly considering the scope and ambit of the definition of inputs as contained in Rule 2(k) of CENVAT Credit Rules (CCR), 2004 and without considering the binding judicial precedents on the same issue decided by various Benches of the Tribunal, High Court and the Supreme Court. He further submitted that during the course of manufacture of final product, certain items like kiln, cement mill, tubes and pipes get damaged and require replacement. Iron sheets, plates, welding electrodes are used along with gases for welding purposes. These items are used in the manufacture and maintenance of plant and machinery which are nothing but inputs used indirectly in the process of manufacture of final products. He further submitted that the issue whether welding electrodes and other items which are used for repair and maintenance of plant and machinery fall in the definition of inputs has been settled in favour of the appellants by decisions of various High Courts and the Tribunal wherein the Courts have consistently held that welding electrodes and other items used directly or indirectly in relation to manufacture of final products are eligible for credit under CCR, 2004 and earlier under Rule 57A of the Central Excise Rules, 1944. In support of this submission, he relied upon the following decisions:
* Hindustan Zinc Ltd. vs. UOI: 2008 (228) ELT 517 (Raj.) * National Cooperative Sugar Mills Ltd. vs. CCE: 2016 (344) ELT 832 (Mad.) * M/s. Tamil Nadu Newsprints & Paper Ltd. vs. CCE: 2017-TIOL-1093-HC-MAD.
* Ambuja Cements Eastern Ltd. vs. CCE: 2010 (256) ELT 690 (Chattisgarh) * CCE, Trichy vs. CESTAT, Chennai: 2014 (309) ELT 71 (Mad.) * CCE, Coimbatore vs. Madras Aluminium: 2008 (226) ELT 342 (Mad.) * CCE vs. Alfred Herbert (I) Ltd.: 2010 (257) ELT 29 (Kar.) * India Sugars and Refineries Ltd. vs. CCE: 2006 (205) ELT 717 (Tri.-Bang.) * Indian Seamless Metal Tubes Ltd. vs. CCE: 2004 (177) ELT 374 (Tri.-Mum.) * CCE, Salem vs. Indian Cement Ltd.: 2006 (199) ELT 75 (Tri.-Chennai) 4.1 He further submitted that the issue of availability of CENVAT credit on welding electrodes utilised for the purpose of repair and maintenance is decided by the Honble Supreme Court in the case of Ramala Sahkari Chini Mills vs. CCE, Meerut reported in 2010-TIOL-102-SC-CX wherein the apex court referred the matter to the Larger Bench. Further, the Larger Bench as reported in 2016-TIOL-20-SC-CS-LB held that the term include in the statutory definition of inputs is generally used to enlarge the meaning of the preceding words and it is by way of extension and not with restriction. They also submitted that after the decision of the Larger Bench of Supreme Court, various Benches of the Tribunal has allowed CENVAT credit on welding electrodes as inputs and for this submission, he relied upon the following decisions:
* M/s. Steel Authority India Pvt. Ltd. vs. CCE, Raipur: 2017-TIOL-1883-CESTAT-DEL.
* M/s. GR Sponge and Power Ltd. vs. CCE, Raipur: 2017-TIOL-1004-CESTAT-DEL.
* Neoli Sugar Factory vs. CCE, Agra: 2017-TIOL-638-CESTAT-ALL.
* M/s. India Cement Ltd. vs. CCE, Hyderabad: 2016-TIOL-2423-CESTAT-HYD.
* M/s. Orient Cement vs. CCE, Hyderabad: 2016-TIOL-239-CESTAT-HYD.
5. On the other hand the learned AR reiterated the findings of the impugned order and submitted that the welding electrodes, pig iron and oxygen gas are not inputs in terms of Rule 57A of the Central Excise Rules, 1944 and therefore, the CENVAT credit on these items which are used in the activity of repair and maintenance of machinery is not admissible under law. In support of his submission, the learned AR relied upon the following decisions:
* CCE, Lucknow vs. M/s. Oudh Sugar Mills Ltd.: 2017-TIOL-220-HC-ALL-CX * Ramala Sahkari Chini Mills Ltd. vs. CCE, Meerut:2016-TIOL-20-SC-CS-LB * Ramala Sahkari Chini Mills Ltd. vs. CCE, Meerut:2010 (260) ELT 321 (SC) * M/s. The Dhampur Sugar Mills Ltd. vs. CCE: 2015-TIOL-1412-HC-ALL-CX * Upper Ganges Sugar & Industries Ltd. vs. CCE, Meerut-II: 2013 (293) ELT 186 (All.) * Sree Rayalaseema Hi-Strength Hypo Ltd. vs. CCE, Tirupati: 2012 (278) ELT 167 (AP)
6. After considering the submissions of both the parties and perusal of the definition of inputs under the old Rules, 1944 and Rule 2 (k) of the CCR, 2004 and also the various decisions relied upon by the appellant wherein it has been consistently held that welding electrodes used for repair and maintenance of machinery is in relation to manufacture of final product and therefore, CENVAT credit is admissible.
6.1 Further, in appeal No.E/3181/12, E/27293/2013, and E/1542/2010 wherein the CENVAT credit was denied on pig iron which was used for manufacturing parts for the repair and maintenance of paper mill machinery.
6.2 Whereas in Appeal No. E/20002-20009/2015, the issue involved was whether the welding steel rods and welding steel wires used by the appellant in the activity of refurbishing of the forging dyes are inputs and whether the assessee is entitled to CENVAT credit on these items as per CCR, 2004
7. Further, I find that in the case of CCE vs. Alfred Herbert (I) Ltd. reported in 2010 (257) ELT 29 (Kar.) wherein the Honble Karnataka High Court has held that CENVAT credit in respect of goods which were used for repair and maintenance of plant and machinery is admissible. Further, the Honble Karnataka High Court in the case of Commissioner of Central Excise vs. M/s. Vasavadatta Cement decided in Excise Appeal No.304/2008 wherein the Honble Karnataka High Court has framed a substantial question of law as to Whether the Tribunal is correct in holding that the CENVAT credit availed on the value of welding electrodes used for repair and maintenance of equipments in the course of manufacture of product by the respondent is an input in the production of excisable goods and therefore, the assessee was entitled to claim CENVAT credit on the value of welding electrodes. Thereafter, the Honble High Court after considering the submissions of the counsel for the Revenue and also various other decisions on the issue has answered the substantial question of law in favour of the assessee by holding that the manufacturer/assessee is entitled to CENVAT credit of the value of welding electrodes used for repair and maintenance of equipments in the manufacture of product as an input. Here it is pertinent to reproduce para 4 and 5 of judgment of the Honble High Court of Karnataka.
4. Therefore, the short question is. while welding electrodes could be construed as an 'input' in the manufacture of cement in this case. In order to decide this issue, it is necessary to see the definition of 'input' contained in clause (k) of Rule 2 of the CENVAT Credit Rules, 2004 which reads as under
"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 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.
A reading of the aforesaid provision makes it clear that 'input' means all goods used in or in relation to manufacture of final products, whether directly or indirectly and whether contained in the final product or not used in or in relation to manufacture of final products or for any other purpose, within the factory of production. What are the things which cannot be included in the definition is contained in the provision itself. All other things which are excluded would fall within the definition of 'all goods' and therefore, it is an 'input'. in fact, the apex court in a different context had an occasion to consider the phrase 'in the manufacture of goods (J.K.COTTON SPINNING AND WEAVING MILLS COMPANY LIMITED vs. SALES TAX OFFICER, KANPUT [AIR 1965 SC 1310]) wherein it is held as under:
The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw material into finished goods. 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 in our judgment, fall within the expression 'in the manufacture of goods.....
Goods used as equipment, as tools, as stores, as spare parts, or as accessories in the manufacture or processing of goods, in mining, and in the generation and distribution of power need not, to qualify for special treatment under S.8 (1), be ingredients or commodities used in the processes, nor must they be directly and actually needed for "turning out or the creation of goods".
In the aforesaid judgment, the Hon'ble Supreme Court went to the extent of holding that in a factory manufacturing cotton, certain electrical equipments would be commercially necessary; for instance, without electrical lighting, it would be difficult to carry on business, and the same was held to be an 'input' in the 'manufacture of goods'. Thus, all commodities used in the creation of goods would be 'inputs' and the definition in the Rules is quite exhaustive.
5. Probably keeping in mind this interpretation of the Apex court, the definition of input' is enacted, i.e. used in or in relation to manufacture of final products whether directly or indirectly and whether contained in the final product or not' The Rajasthan High Court had an occasion to consider a similar pcin in the case of HINDUSTAN ZINC LTD Vs. UNION OF INDIA (2008 [2281 E.L.T. 517 Raj.). Relying on the aforesaid judgment of the Supreme Court in a case dealing with whether CENVAT credit was admissible on welding electrodes used for repairs and maintenance of plant and machinery, it was held all goods used for repairs and maintenance of plant and machinery are eligible for CENVAT credit both as capital goods we as well as inputs. We respectfully agree with the said judgment rendered by the Division Bench of the Rajasthan High Court. In fact, this judgment has been taken note of by the respondent/assessee. Therefore, we answer the substantial question of law in favour of the assessee, holding that. manufacturer/assessee is entitled to CENVAT credit of the value of welding electrodes used for repairs and maintenance of equipments in the course of manufacture of the product. as an input in the production of excisable goods. 7.1 Further, I find that in the case of CCE vs. The West Coast Paper Mills Ltd. vide Final Order No. 21052 21053/2015 decided on 1.5.2015, this Tribunal by relying upon decision of the rendered in the case of Kisan Cooperative Ltd. vs. CCE: 2013 (296) ELT 523 (Tri.-Del.) has held that welding electrodes for repair and maintenance of plant and machinery are eligible for CENVAT credit.
8. I have gone through the judgments relied upon by the learned AR but the same are distinguishable on facts and are not applicable in the facts and circumstances of the present case whereas the judgments of the Honble Karnataka High Court cited supra are clearly on the point of welding electrodes and are squarely applicable. Therefore, by following the ratios of the various decisions relied upon by the counsel for the assessees, I am of the view that the issue is settled in favour of the appellants and therefore, I allow the appeals of the appellants by setting aside the impugned order with consequential relief, if any.
(Order was pronounced in open court on 27/06/2017.) S.S GARG JUDICIAL MEMBER rv 11 1