Custom, Excise & Service Tax Tribunal
M/S. Tamil Nadu Newsprint & Papers Ltd vs Cce, Trichy on 5 September, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/418/2012
(Arising out of Order-in-Appeal No. 90/2012 dated 24.05.2012, passed by the Commissioner of Central Excise (Appeals), Trichy).
For approval and signature
Honble Shri R. PERIASAMI, Technical Member
_______________________________________________________
1. Whether Press Reporters may be allowed to see the : No
order for Publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether the Honble Member wishes to see the fair : Seen
copy of the Order.
4. Whether order is to be circulated to the : Yes
Departmental Authorities? _______________________________________________________
M/s. Tamil Nadu Newsprint & Papers Ltd. : Appellant
Vs.
CCE, Trichy : Respondent
Appearance Shri R. Suresh, Adv., for the appellant Shri P. Arul, Supdt., (AR) for the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Date of Hearing : 01.08.2014 Date of Pronouncement:
FINAL ORDER No. 40585 / 2014The appellant filed this appeal against the OIA No. 90/2012 dated 24.05.2012, passed by the Commissioner (Appeals).
2. The brief facts of the case are that the appellants are manufacturers of Printing & Writing Paper and Newsprint falling under Chapter 48 of first schedule to the Central Excise Tariff Act, 1985. They are availing Cenvat credit on welding electrodes falling under Chapter 8311of the CETA, 1985. A Show Cause Notice dated 29.03.2011 issued to the appellant denying the cenvat credit of Rs.3,05,598/- availed on the welding electrodes during the period May, 2010 to February, 2011. The adjudicating authority in his order dated 24.06.2011 confirmed the demand and imposed penalty of Rs. 3,000/-. The Commissioner (Appeals), by impugned order upheld the order of the lower authority and rejected the appeal. Hence, the present appeal.
3. Heard both the sides. The Ld. Advocate on behalf of the appellant submits that this Tribunals Final order No. 1300/2011 dated 13.12.2011, passed in their own case disallowing credit on welding electrodes is stayed by the Honble Madras High Court vide interim Order in CMA 1236/2012 dated 11.06.2012 (MP.No. 1/2012). He submits that in their own case, this Tribunal has earlier allowed cenvat credit on welding electrodes vide Final Order No. 721/2010 dated 01.07.2010. The welding electrodes are used in their manufacturing plant for repairs and maintenance of plant and machinery for the manufacture of excisable goods. He relied upon the following High Courts and Tribunals various case laws:-
1. CCE Vs. India Cements Ltd.
2009 (238) ELT 411 (Mad.)
2. Kisan Co-operative Sugar Factory Ltd. Vs. CCE, Meerut 2013 (296) ELT 523 (Tri.-Del.)
3. Mangalam Cements Ltd. Vs. CCE (ST), Jaipur 2014-TIOL-604-CESTAT-DEL
4. Oswal Overseas Ltd. Vs. CCE, Meerut 2010 (254) ELT 338 (Tri.-Del.)
5. U.P. State Sugar Corporation Ltd. Vs. CCE, Noida 2013 (293) ELT 259 (Tri.-Del.)
6. Ambuja Cements Eastern Ltd. Vs. CCE 2010 (256) ELT 690 (Chhattisgarh)
4. On the other hand, the Ld. AR reiterated the findings of the Commissioner (Appeals) and submits that the Commissioner (Appeals) has rightly upheld the order of the adjudicating authority by relying this Tribunals Final Order No. 1300/2011 dated 13.12.2011, passed in appellants own case, wherein the Tribunal held that the appellants are not eligible for cenvat credit on welding electrodes. He relied upon the following decisions in support of his contention.
1. Sree Rayalaseema Hi-strength Hypo Ltd. Vs. CCE Tirupati 2012 (278) ELT 167 (A.P.)
2. Ramala Sahkari Chini Mills Ltd. Vs. CCE, Meerut 2010 (260) ELT 321 (S.C.)
3. CCE Vs. Kichha Sugar Co. Ltd.
2012-TIOL855-HC-UKHAND-CX
4. SAIL Vs. CCE, Ranchi 2008 (222) ELT 233 (Tri.- Kol.) He submits that the issue on admissibility of credit on welding electrodes has been referred to the Larger Bench of the Supreme Court in the case of Ramala Sahkari Chini Mills Ltd. Vs. CCE, Meerut (supra).
5. I have considered the submissions of both the sides and perused the case records. The main dispute in this case is whether cenvat credit is admissible on the welding electrodes used for repair and maintenance of the plant and machinery during the period from March, 2010 to February, 2011. This issue of admissibility of cenvat credit on welding electrodes came before this Tribunal in 2010 and again in 2011 against the appellants own case for the earlier periods. The Tribunal by Final Order No. 721/2010 dated 01.07.2010, in appeal No. E/699/09, has allowed their appeal and held that cenvat credit is admissible on welding electrodes used for repair and maintenance of plant and machineries. Subsequently, in 2011 this Tribunal vide Final Order No. 1300/2011 dated 13.12.2011, had held different views and dismissed their appeal and held that the appellants are not eligible for cenvat credit on welding electrodes used for repair and maintenance of plant and machineries. The Tribunal in 2011 order relied the Tribunal Order in the case of SAIL Vs. CCE, Ranchi (supra), on the ground that the appeal was against this order was dismissed by the Honble Supreme Court. The Honble Madras High Court had stayed the said Tribunals Order vide Honble Madras High Court interim Order in CMA 1236/2012 dated 11.06.2012 (MP.No. 1/2012).
6. It is pertinent to state that the issue of admissibility of cenvat credit on the welding electrodes used for repair and maintenance of plant and machinery has been agitated before the Honble Apex Court and various High Courts and Tribunals and held in favour as well as against the assessees. As regards the Tribunals Order No. 1300/2011 dated 13.12.2011, where in the appellants appeal was dismissed by relying the Tribunals decision in the case of SAIL Vs. CCE, Ranchi (supra). The said decision has been clearly distinguished by the Honble High Court of Chhattisgarh in the case of Ambuja Cement Eastern Ltd. (supra).
7. I find that the Honble High Court of Madras in the case of CCE, Trichy Vs. India Cements Ltd. (supra) on the identical issue has upheld this Tribunals order and the relevant portion of the Honble High Court Order is as under:-
4. Aggrieved by the said order, the appellant has filed the above appeal, raising the following question of law.
Whether the Tribunal is correct in holding that the goods i.e. Welding Electrodes used for repairs and maintenance are covered under the definition of Capital Goods in terms of Rule 57Q prevailing the material time and whether the credit availed on welding electrodes is in order?
5. The Larger Bench of the Tribunal in Jawahar Mills Ltd. Vs. Commissioner of Central Excise, Coimbatore (1999 (108) ELT 47) upheld that control panels, cables, welding electrodes etc. would also qualify as capital goods under Rule 57Q of the Rules and would be eligible for Modvat credit.
6. On appeal against the said decision in Commissioner of Central Excise, Coimbatore Vs. Jawahar Mills Ltd. (2001 (132) ELT 3) the Apex Court, confirming the views of the Larger Bench, dismissed the appeal holding that power cables and capacitors, control panels, cables distribution boards, switches and starters, air compressors and electric wires cables would qualify as capital goods under Rule 57Q of the Central Excise Rules.
7. The Apex Court in Commissioner Vs. Birla Jute & Industries Ltd. (2002 (139) ELT A93), while confirming the earlier views of the Supreme Court and the Larger Bench of the Special Tribunal, held that Modvat credit was admissible of Electrodes and Calibration Gas Mixture (Welding equipment), but not for explosives under erstwhile Rule 57A of the Rules.
8. As the question of law referred is in favour of the assessee, as held by the Tribunal and the Apex Court in the cases cited above, we hold that the Tribunal is correct in holding that the welding electrodes used for repair and maintenance are covered under the definition of capital goods in terms of Rule 57Q of the Rules. Accordingly, the appeal stands dismissed. The above judgment was relied by the Tribunal in the appellants own case in Final Order No. 721/2010 dated 01.07.2010.
8. I find that the Tribunals Principal Bench order dated 03.06.2013 in the case of Kisan Co-operative Sugar Factory Ltd. Vs. CCE, Meerut (supra), the issue has been discussed at length by considering the rulings of various High Courts and Tribunal, and allowed the appeal. The relevant portion of the said decision is reproduced as under:-
6. The definition of input during the period of dispute, as given in Rule 2(k) of the Cenvat Credit Rules, 2004, covered all goods except light diesel oil, HSD and motor spirit commonly known as petrol used in or in relation to manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes. 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. v. Sales Tax Officer, Kanpur reported in 1997 (91) E.L.T. 34 (S.C.) 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 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. v. Commissioner of Commercial Taxes, Bihar - CA No. 1021 of 1969, dated 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. v. Assistant Collector of Central Excise reported in 1993 (66) E.L.T. 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. v. Commissioner of Central Excise, Ranchi reported in 2008 (222) E.L.T. 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) E.L.T. 517 (Raj.) and Honble Karnataka High Court in case of Alfred Herbert (India) Ltd. reported in 2010 (257) E.L.T. 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) E.L.T. 10 (S.C.) 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 operations are commercially feasible, and it is not relevant as to whether that activity by itself amounts manufacture. In the case of Sree Rayalaseema Hi-Strength Hypo Ltd., reported in 2012 (278) E.L.T. 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 operations 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."
In the above order, the Honble Tribunal relied the decisions of the Honble High Courts of Karnataka, Rajasthan and Chhattisgarh and distinguished the Honble Andhra Pradesh High Court decision in the case of Sree Rayalaseema Hi-strength Hypo Ltd. Vs. CCE Tirupathi and SAIL Vs. CCE (supra). Therefore, by respectfully following the decision of the Honble Madras High Court and the Tribunals decisions discussed above, I hold that the appellants are eligible for cenvat credit availed on the welding electrodes used for repair and maintenance of the plant and machinery, used in the manufacture of the final products. Accordingly, the impugned order is set aside and the appeal is allowed.
(Order pronounced in the open Court on )
(R. PERIASAMI)
TECHNICAL MEMBER
BB
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