Custom, Excise & Service Tax Tribunal
Coms,C.Ex - Jsr vs Tata Steel Ltd on 18 December, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Ex.Appeal No.79 of 2009
(Arising out of Order-in-Appeal No.203/JSR/2008 dated 16.12.2008 passed by
Commissioner of Central Excise & S.Tax (Appeals), Ranchi)
CCEx. & S.Tax, Jamshedpur
143,New Baradwari,
Sakchi,
Jamshedpur
Applicant (s)
VERSUS
M/s Tata Steel Ltd.
Bistupur,
Jamshedpur-831001.
Respondent (s)
APPERANCE :
Shri K. Chowdhury, Authorized Representative for the Appellant
Dr.Samir Chakraborty, Sr. Advocate and Shri Abhijit Biswas, Advocate for the
Respondent
AND
Ex.Appeal No.76127 of 2014
(Arising out of Order-in-Original No.06/Denovo/Commr./2014 dated 26.03.2014
passed by Commissioner of Central Excise & S.Tax, Jamshedpur)
M/s Tata Steel Ltd.
Bistupur,
Jamshedpur-831001.
Applicant (s)
VERSUS
CCEx. & S.Tax, Jamshedpur
143,New Baradwari,
Sakchi,
Jamshedpur
Respondent
(s)
APPERANCE :
Dr.Samir Chakraborty, Sr. Advocate and Shri Abhijit Biswas, Advocate for the
Appellant
Shri K. Chowdhury, Authorized Representative for the Respondent
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Ex.Appeal No.79/09 &
76127/14
CORAM:
HON'BLE MR. P.K.CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR.BIJAY KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO...76928-76929/2019
DATE OF HEARING : 06.08.2019
DATE OF PRONOUNCEMENT : 18 December, 2019
PER P.K.CHOUDHARY :
The present two appeals are against :
(i) Order-in-Appeal dated December 16, 2008 passed by the
Commissioner (Appeals), Central Excise, Ranchi allowing the appeal of
Tata Steel Limited (in short, "TSL") against Order-in-Original dated
December 22, 2006 passed by the Additional Commissioner of Central
Excise, Jamshedpur; filed by the Revenue.
(ii) Order-in-Original dated March 26, 2014 passed by the
Commissioner of Central Excise & Service Tax, Jamshedpur confirming
duty demand of cenvat credit wrongly availed and utilised amounting to
Rs. 50,70,524/-, along with interest and penalty of Rs. 5,00,000/-
imposed upon TSL; filed by TSL.
2. The period involved in the first appeal is from April 2000 to March 2002.
The period involved in the second appeal is from May to June 2002.
3. In both the appeals the issues involved relate to eligibility of cenvat
credit of items under the relevant provision of the Cenvat Credit Rules
in force during the respective periods. These items were used by TSL at
its steelworks in Jamshedpur.
4. One of the items which is common in both the appeals is ingot moulds,
which were declared as "capital goods". According to the Revenue, TSL
was not eligible to avail cenvat credit of the balance 50% of the duty
paid on ingot moulds in the subsequent year since they were not in
TSL's possession and therefore availment of the said balance 50% of
the cenvat credit and utilisation thereof was irregular. This has been
contested by TSL, according to whom the cenvat credit of the balance
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Ex.Appeal No.79/09 &
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50% availed on ingot moulds in the subsequent year was valid, proper
and in accordance with the provisions of the Cenvat Credit Rules.
5. The second appeal involved several other items which have been listed
in Annexure-1 of the show cause notice dated May 23, 2003 which
resulted in the impugned Order-in-Original dated March 26, 2014 of the
Commissioner.
6. In the first appeal against the adjudication order dated December 22,
2006 of the Additional Commissioner, TSL preferred an appeal before
the Commissioner (Appeals) which was allowed by him upon holding
that ingot moulds were "accessory" of the LD Converter, a capital goods
specified in Rule 2(b) of the Cenvat Credit Rules, 2001 and Rule 57Q of
the erstwhile Central Excise Rules, 1944 and therefore TSL was eligible
to and had correctly availed cenvat credit of the balance 50% of the
duty paid, in the subsequent year inspite of the moulds being not in its
possession.
7. We have heard Dr. Samir Chakraborty, Ld. Sr. Advocate and Shri Arijit
Biswas, Advocate on behalf of TSL and Shri K. Chowdhuri , Supdt (AR)
on behalf of Revenue and perused the appeal records.
8. On the issue of availment of cenvat credit of the balance 50% on ingot
moulds, it was contended on behalf of TSL as follows:
(i) Though as per Rule 57AA(a)(ii) of the Cenvat Credit Rules, 1944 (in
short, "1944 Rules") and Rule 2(b)(ii) of the Cenvat Credit Rules, 2001
moulds and dies are capital goods, this in no manner precludes such
moulds and dies to be treated in appropriate cases as components or
accessories of the goods specified in Rule 57AA(a)(i) of the 1944 Rules
and Rule 2(b)(i) of the Cenvat Credit Rules, 2001. When such moulds
are used as such components and accessories, the exception as
provided in Rule 4(2)(b) of the Cenvat Credit Rules, 2001/Rule
57AC(2)(b) of the 1944 Rules applies and hence, even if ingot moulds
are not in possession of TSL in the subsequent year, the cenvat credit in
respect of the balance 50% of the duty paid is available to TSL. In
support, reliance has been placed upon the Circular of CBEC issued
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Ex.Appeal No.79/09 &
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under F.No. B-04/05-CX-8 dated May 5, 2000, para (c) and upon the
following decisions:
(a) Annapuna Carbon Industries Co. Vs. State of Andhra Pradesh,
1976 (37) STC 378 (SC)
(b) Pragati Silicons Pvt. Ltd. Vs. CCE, Delhi, 2007 (211) ELT 534 (SC)
(c) Union of India Vs. Rishabhdev Textiles, 2001 (141) ELT 352 (Raj)
(d) Precision Rubber Industries Vs. Collector of Central Excise, 1990
(49) ELT 170 (Bom)
(e) Banco Products (India) Ltd. Vs. Commissioner of C.Ex., 2009
(235) ELT 636 (T-LB).
(ii) In the ingot process of steel making, an ingot mould is an essential
accessory without which steel product making is not possible. In
support of this reliance is placed upon:
(a) An article entitled "The Making, Shaping and Treating of Steel",
10th Edition/Latest Technology, published by The Association of Iron and
Steel Engineers, USA, relevant extracts from Chapter 20;
(b) "Introduction to Modern Steelmaking [A Text Book for Engineering
Students]" by Dr. R.H. Tupkary, relevant extracts from paras 24.4 and
24.5;
(c) IS Specification bearing Nos. IS:3005 (part I) - 1979 and (Part
II) - 1979;
(d) Definition of "ingot mould" in Chambers' Science & Technology
Dictionary.
The contention of the Revenue that steel making is possible without the
ingot mould in the ingot process of steel making is misconceived, which
is evident from the abovestated literature.
(iii) TSL has a L.D.-1 shop wherein iron is melted. The ingot mould is
required to give shape to liquid steel, to solidify liquid steel by
absorbing temperature. There are two types ingot moulds namely T.P. 5
on top pouring and bottom pouring moulds. The ingot mould is used in
bottom Bogey Pouring set. One bottom Bogey Pouring set contains six
Bogeys for transporting the set from LD shop to stripping section of LD
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Ex.Appeal No.79/09 &
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shop and vice versa ready stock set back from ingot logistic section to
main LD Shop teeming section. Liquid metal is poured in the set of ingot
mould and after pouring teeming process is complete in the said mould
and the liquid steel remains in the ingot mould for solidification. After
solidification of liquid metal and upon being converted into ingot, the
ingot is stripped out of ingot mould and the empty ingot moulds are
again used for solidification of liquid metal. The ingot mould is therefore
an "accessory" of the LD-1 shop without which steel ingot cannot be
manufactured. After several uses the said moulds are required to be
replaced.
(iv) In Circular bearing No. 4/89-C.Ex.8, issued under F. No. 267/103/87-
C.Ex.8 dated March 21, 1989, the Board has categorically observed that
ingot moulds are used in the process of making steel ingots from
molten metal and is in the nature of an "apparatus" for giving proper
shape to the cast iron and steel products thus, in effect, thus confirming
that ingot mould is also an "accessory", falling under clause (ii) of both
Rule 57AA(a) of the 1944 Rules and Rule 2(b) of the Cenvat Credit
Rules, 2001.
(v) Hence, cenvat credit of the balance 50% of the duty paid on ingot
moulds has been correctly availed inspite of they being not available in
the subsequent years.
(vi) Contrary to the contention of the Revenue, Shri Amreekh Singh, Head
(operations) of LD-1, by a letter dated November 13, 2002 clarified his
statement dated November 7, 2002 and answer to Question No. 9
thereof, inter alia, stating in clear terms that ingot mould is
component/accessory of LD shop without which steel ingot cannot be
produced. He requested that the first sentence of his answer to Q. No. 9
be corrected accordingly. Though the said document is a relied upon
document enclosed with the show cause notice, the same has been
deliberately omitted in order to make out a case against TSL. Further,
this statement of Amreekh Singh is also supported by Mr. B.
Muthuraman, the then Managing Director of TSL in his response dated
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Ex.Appeal No.79/09 &
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January 24, 2003 to the questionnaire issued by the investigating
authority. The answer to Question Nos. 8 to 13 of this RUD are relevant.
9. In so far as the rest of the items, being the subject matter of the Appeal
No. E/76127/2014, it was submitted on behalf of TSL as under:
(i) The Commissioner had wrongfully rejected that TSL had failed to
establish that the goods covered by Sl. Nos. 1 to 9, 10, 16 to 20, 22,
29, 30, 32, 34, 35 and 43 of Annexure-I to the show cause notice had
been used in or in relation to the manufacture of finished goods and
hence, even as input materials, they were not eligible to cenvat credit.
Annexure to the reply to the show cause notice filed both in the instant
proceedings, being a chart prepared, vis-à-vis Annexure-1 of the show
cause notice, against each item the manner in which the subject
materials were used in or in relation to the manufacture of dutiable final
products in the steelworks are stated, establishing the correctness of
the availment of cenvat credit and utilisation thereof. They have not
been considered.
(ii) Even though initially declarations were made that the subject goods
were capital goods, TSL cannot be denied benefit of input credit on such
goods as input materials once it is established, as the case is, that the
said goods were used in or in relation to the manufacture of final
products in the assessee's factory, directly or indirectly, as has been
held in:
(a) Commr. of Cus & C.Ex. Vs. Modi Rubber Ltd., 2000 (119) ELT 197
(T-LB).
(b) Commissioner of Cus & C.Ex. Vs. Bhilai Steel Plant, 2010 (261)
ELT 612 (T) ;
(c) Commissioner of Central Excise Vs. Core Fitness Pvt. Ltd., 2017
(4) GSTL 80 (T),
(iii) Denial of cenvat credit on welding wires and rods covered under Sl.
Nos. 5 to 8 of Annexure-1 to the show cause notice, relying upon a
Single Member Bench decision of the Tribunal, was erroneous, since in
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Ex.Appeal No.79/09 &
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subsequent decisions several High Courts specifically held that cenvat
credit was available on welding wires and rods used in the manner as in
the instant case, which are detailed in the aforesaid chart submitted. In
support, reliance was placed upon the following decisions:
(a) Ambuja Cements Eastern Ltd. Vs. Commissioner of Central Excise,
2010 (256) ELT 690 (Chhattisgarh)
(b) ACC Limited Vs. CCE, 2018 (361) ELT 343 (Bom)
(c) Tamilnadu Newsprints & Paper Ltd. Vs. Commr. of C.Ex., 2017
(357) ELT 60 (Mad)
(d) National Co-operative Sugar Mills Ltd. Vs. Commr. of C.Ex., 2016
(344) ELT 832 (Mad).
The cenvat credit of Rs. 2.48 lakhs availed on these items are therefore
legal and proper.
(iv) Further and in any event the goods covered by Sl. Nos. 36 and 37 of
Annexure-1 of the show cause notice are imported electrodes which
were used for welding of rolls, which in turn were used in slab caster in
the LD-2 plant, a "capital goods" under Rule 2(b)(i) of the Cenvat Credit
Rules. Each slab caster has approximately 332 rolls without which
casting of slab is not possible. Once the slab is cooled down it is sent to
the Hot Strip Mill for making HR coils. After certain life, rolls get worn
out and the barrel of rolls are welded and re-machined to bring it to
normal diameter. Rolls are welded and used till they gets broken and
then are discarded. The imported electrodes are used for welding of
these rolls. The rolls being "component" of slab caster within the
meaning of Rule 2(b)(iii) of the Cenvat Credit Rules, TSL was duly
eligible to avail cenvat credit of the duty paid in respect of electrodes as
inputs. Reliance was placed upon the decision of the Chattisgarh High
Court in the case of Commr. of Cus. C.Ex. & ST Vs. Singhal
Enterprises Pvt. Ltd., 2018 (359) ELT 313 (Chattisgarh), affirming
the Tribunal's decision in Singhal Enterprises Pvt. Ltd. Vs. Commr.
of Cus & C.Ex., 2016 (341) ELT 372 (T). TSL had therefore correctly
availed cenvat credit of the duty of Rs. 7,83,542/- paid in respect of the
said imported electrodes.
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Ex.Appeal No.79/09 &
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(v) The Commissioner, inspite of coming to the conclusion that the office
equipments referred to in Sl. No. 15 of Annexure-1 of the show cause
notice formed a part of the Distributed Control System ("DCS") and
were used in connection with production of steel and hence credit on
the same was available and holding accordingly, did not deduct the
same from the demand made in the Order part of the order and, on the
contrary, confirmed the same, thereby erroneously denying the credit of
Rs. 5,43,414/- to which TSL was duly eligible to. Confirmation of
demand of this amount is ex-facie unsustainable.
(vi) There being no contravention by TSL of any provision of the Cenvat
Credit Rules nor any irregular or wrongful availment of cenvat credit by
it, imposition of penalty of Rs. 5 lakhs under Rule 13 of the Cenvat
Credit Rules is untenable and unsustainable.
10. On behalf of the Revenue, on the issue of cenvat credit availability of
the balance 50% of the duty paid on ingot moulds in the subsequent
year, besides reiterating the findings of the Commissioner in the
adjudication orders dated December 22, 2006 of the Additional
Commissioner in the first appeal and dated March 26, 2014 of the
Commissioner in the second appeal, it was contended as under:
(i) The Commissioner (Appeals) without referring to any technical
literature has come to a definite finding to the effect that ingot mould is
an accessory of the plant and not an independent capital goods. Ingot
moulds have all along been specified as capital goods under Rule 2 of
the Cenvat Credit Rules as a separate entry, quite distinguished from
the parts and accessories thereof. The qualifying grounds of "possession
and use" of such moulds for eligibility of balance 50% credit in next
financial year was mandatory statutory condition as stipulated during
the relevant period. Hence, such capital goods not existing, no further
cenvat credit could be availed.
(ii) The Commissioner (Appeals) has ignored the statement of Sri
Amreek Singh, Head (Operations), LD-1 plant of TSL recorded under
Section 14 of the Act on November 7, 2002 and November 16, 2002
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Ex.Appeal No.79/09 &
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wherein he had stated that ingot mould function independently and it
was neither part nor spare nor component nor accessories of any plant
or any shop. He also stated that 90% of the steel is produced through
continuous cast route and balance nearly 10% is through ingot mould
route.
(iii) The Commissioner (Appeals)'s finding is not based on the facts
brought on record during the investigation and has also ignored the fact
that TSL in its declaration filed under erstwhile Rule 57T of the Central
Excise Rules, 1944 has declared ingot mould as parent
machine/equipment.
(iv) Prior to amendment of Rule 4(2) of the Cenvat Credit Rules w.e.f.
September 15, 2003 and issuance of CBEC's Circular No. 755/71/2003
dated October 13, 2003, there was no provision for allowing balance
50% cenvat credit on moulds and dies used as capital goods and not in
existence during the next financial year. The Hon'ble CESTAT, South
Zonal Bench, Chennai in the case of Sri Krishna Alloys Vs.
Commissioner of Central Excise, Salem, 2006 (200) ELT 158 (Tri-
Chennai) also confirms the above position.
(v) Hence, the impugned Order-in-Appeal dated December 16, 2008 passed
by the Commissioner (Appeals) is liable to be set aside and the
adjudication order dated December 22, 2006 of the Additional
Commissioner restored in the first appeal and the appeal of TSL against
the impugned order dated March 26, 2014 of the Commissioner is liable
to be rejected.
11. In respect of the other items involved in Appeal No. E/76127/2014 filed
by TSL, the Revenue reiterated the findings of the Commissioner in the
impugned order dated March 26, 2014.
12. The contentions of both the parties have been considered.
13. Availability of cenvat credit on the balance 50% of the duty paid on
ingot moulds during the subsequent year in the absence of the said
moulds being unavailable with TSL.
13.1 Rule 57AA(a) of the Central Excise Rules, 1944 is as follows:
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"57AA. Definitions.-
For the purpose of this section,-
(a) "capital goods" means-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85,
Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the
First Schedule to the Central Excise Tariff Act, 1985;
(ii) components, spares and accessories of the goods specified at
(i) above;
(iii) moulds and dies;
(iv) refractories and refractory materials;
(v) tubes and pipes and fittings thereof, used in the factory; and
(vi) pollution control equipment,
used in the factory of the manufacturer of the final products;
Explanation. - For removal of doubts, it is hereby clarified that "capital
goods" do not include any equipment or appliances used in an office."
13.2 Rule 57AC(2)(b) of the Central Excise Rules, 1944 reads as
follows:
"(b) The balance of CENVAT credit may be taken in any financial year
subsequent to the financial year in which the capital goods were
received in the factory of the manufacturer [provided that the capital
goods (other than components, spares and accessories, refractories and
refractory materials and goods falling under heading No. 68.02 and sub-
heading No. 6801.10 of the First Schedule to the Central Excise Act)
are], still in the possession and use of the manufacturer of final
products in such subsequent years."
13.3 Rule 2(b) of the Cenvat Credit Rules, 2001/2002 reads as follows:
"(b) "capital goods" means -
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85,
Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the
First Schedule to the Central Excise Tariff Act;
(ii) components, spares and accessories of the goods specified
at (i) above;
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Ex.Appeal No.79/09 &
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(iii) moulds and dies;
(iv) refractories and refractory materials;
(v) tubes and pipes and fittings thereof;
(vi) pollution control equipment; and
(vii) storage tank,
used in the factory of the manufacturer of the final products, but does
not include any equipment or appliance used in an office."
13.4 Rule 4(2)(b) of the Cenvat Credit Rules, 2001/2002 is as follows:
"(b) The balance of CENVAT credit may be taken in any financial year
subsequent to the financial year in which the capital goods were
received in the factory of the manufacturer, if the capital goods, other
than components, spares and accessories, refractories and refractory
materials and goods falling under heading No. 68.02 and sub-heading
No. 6801.10 of the First Schedule to the Central Excise Act are in the
possession and use of the manufacturer of final products in such
subsequent years."
Illustration - A manufacturer received machinery on April 16, 2001 in
his factory. CENVAT of two lakh rupees is paid on this machinery. The
manufacturer can take credit upto a maximum of one lakh rupees in the
financial year 2001-2002, and the balance in subsequent years."
13.5 In the Circular of CBEC dated May 5, 2000, it has been observed as
follows:
"(c) In terms of the provisions of Rule 57AC, an assessee can avail
credit in respect of duty paid on capital goods to the extent of 50
percent of such duty in the financial year in which he receives the
capital goods. The balance credit may be taken in a subsequent
financial year subject to the capital goods still being in the use and
possession of the assessee. It had been represented that this condition
could not be satisfied in respect of certain capital goods like
components, spares and accessories, grinding wheels, refractory
materials. These representations have been considered, and Rule 57AC
has been amended to allow credit in respect of the balance 50 percent
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Ex.Appeal No.79/09 &
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of the duty in respect of these capital goods (namely, components,
spares and accessories, refractories and refractory materials and goods
falling under Heading 68.02 and sub-heading 6801.10) in a subsequent
financial year without the condition of these goods being in the use and
possession of the assessee in the subsequent year. The effect of this
amendment would be that the assessee would avail credit of 50 percent
of the duty paid on components, spares and accessories, refractories
and refractory materials and goods falling under Heading 68.02 and
sub-heading 6801.10 in the financial year in which he receives these
goods in his factory; the balance 50 percent credit may be availed by
him in a subsequent financial year even if these goods have been used
by him, and are no longer available in such subsequent financial
year..........."
13.6 From this circular of the Board it is seen that there is no restriction that
in the event a particular goods is a "capital goods", they cannot be
components or spares or accessories of the goods specified in sub-
clause (i) of Rule 57AA(a)/Rule 2(b) of the 1944 Rules and the Cenvat
Credit Rules respectively. In the absence of any such restriction in the
statutory provisions, the conclusion would be that either as components
or accessories of goods falling under clause (i) of the aforesaid Rules or
independently under clause (ii) thereof, moulds, dies, tubes and fittings
would be treated as "capital goods" for the purpose of availment of
cenvat credit. It therefore follows that when such moulds, dies, tubes
and pipes are used as components and accessories of goods specified
under clause (i) of the said Rules, the exception as provided in Rule
4(2)(b) of the Cenvat Credit Rules, 2001/Rule 57AC(2)(b) of the 1944
Rules from the said goods being required to be in possession and use of
the manufacturer of final products in the subsequent year, would be
available and cenvat credit of the duty paid thereon can be availed even
without satisfying such requirement.
13.7 As to what is an "accessory" has been clearly explained by the Apex
Court and by decisions of Hon'ble High Courts and the Tribunal.
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13.7.1 The Supreme Court, in the case of Annapuna Carbon
Industries Co. Vs. State of Andhra Pradesh, 1976 (37) STC 378
(SC), 381-382, has approved the following definition/meaning of the
word "accessories":
"We find that the term "accessories" is used in the schedule to describe
goods which may have been manufactured for use as an aid or addition.
A sense in which the word accessory is used is given in Webster's Third
New International Dictionary as follows: "all objects or device that is not
essential in itself but that adds to the beauty, convenience, or
effectiveness of something else". Other meanings given there are:
"supplementary or secondary to something of greater or primary
importance"; "additional"; "any of several mechanical devices that
assist in operating or controlling the tone resources of an organ".
"Accessories" are not necessarily confined to particular
machines for which they may serve as aids. The same item may be
an accessory of more than one kind of instrument."
This decision was relied upon by the Supreme Court in the case of
Pragati Silicons Pvt. Ltd. Vs. CCE, Delhi, 2007 (211) ELT 534
(SC), para 21, while dealing with what is a "parts" and an "accessory"
in the subject Central Excise Tariff and came to similar conclusion.
13.7.2 The expression "accessory" in erstwhile Rule 57Q of the 1944
Rules also came up for interpretation before the Rajasthan High Court in
the case of Union of India Vs. Rishabhdev Textiles, 2001 (141)
ELT 352 (Raj). Upon reviewing the law on the issue, including decision
of other High Courts, it was observed and held as follows:
"In view of this universal meaning of the expression 'accessory'
which can be assigned to the equipment which is used as
addenda or adjunct, not essential but which adds to its efficiency
and wide meaning adopted by the Courts universally, and keeping in
view in the context of definition of capital goods given in Explanation to
Rule 57Q, the finding recorded by the Commissioner, Central Excise
(Appeals) about the user to which the voltage regulator/voltage
stabilizer in question for efficient use of machines used in the
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Ex.Appeal No.79/09 &
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manufacture of textiles by the assessee, the answer to the question
referred to the Court by the applicant to us appears self evident and
obvious i.e. to say that the articles in question are capital goods as
accessories of the machines used for the purpose of manufacture of
textiles by the assessee and are entitled to Modvat credit in respect
thereof under Rule 57Q."
13.7.3 The Bombay High Court in the case of Precision Rubber
Industries Vs. Collector of Central Excise, 1990 (49) ELT 170
(Bom), wherein, while interpreting the words "components" and
"accessories" in Notification No. 197/67-CE dated August 29, 1967, it
was observed and held as follows (paragraph 10):
"10. It is undisputed that the process of manufacture of aprons and
cots consists of cutting them out of pipings and tubings. The word
"component" means a constituent part or ingredient such as the various
components of electric motor. In the case of chemical system, it is used
to denote an ingredient of a chemical compound. In another sense the
word is used to denote smallest unit of classification. On the other
hand, "accessory" has altogether different connotation. It signifies
aiding or contributing in a secondary or subordinate way. It is
used to denote a role or status which is supplementary or
secondary to something of greater or primary importance. The
word "accessory" is used to suggest that something or
somebody is incidental to the main subject. In other words,
accessory is something which is inessential and secondary or
subordinate to another object. While "component" is always an essential
element of a machine, an accessory is an aid to the machine. A machine
is not a machine without a component. But a machine can perform
without a given accessory."
13.7.4 Relying upon the above decisions of the Supreme Court and the
Rajasthan High Court, the Larger Bench of the Tribunal in the case of
Banco Products (India) Ltd. Vs. Commissioner of C.Ex., 2009
(235) ELT 636 (T-LB), para 14, has also held that an "accessory" may
or may not be required for essential working of main unit; it is an object
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Ex.Appeal No.79/09 &
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used for convenience and effectiveness of main unit and is not designed
to be used in a particular machine only. The Larger Bench was dealing
with the word "accessory" in Rule 2(b) of the Cenvat Credit Rules,
2002, a similar provision.
13.7.5 From these decisions it is clear that a capital goods as defined in
Rule 57AA(a)(ii) of 1944 Rules/Rule 2(b)(ii) of the Cenvat Credit Rules,
2001 can be both used in an independent manner by itself as well as an
accessory of another capital goods covered under clause (i) of both the
said Rules and that the ingot moulds, in the instant case, on an
application of the principles laid down in the aforesaid decisions, is an
"accessory" of the LD Converter, which undisputedly is capital goods
under clause (i) of the said Rules.
13.8 The technical literature and IS Specification produced by TSL also
establish that in the ingot process of steel making an ingot mould is an
essential accessory without which steel product making is not possible.
13.8.1 In the text book, "Introduction to Modern Steelmaking" by Dr.
R.H. Tupkary, inter alia, the following extracts demonstrate the nature
and function of ingot moulds in steel making:
"24.4 The Ingot Mould
Except in steel foundry molten steel is poured into moulds to
produce ingots for rolling, forging, etc. The moulds are
themselves massive castings of more uniform shapes with a
cross-section like square, rectangular, round, ploygonai, etc.
which are used according to the subsequent mechanical working
operations that are to be carried out on the ingots. Ingot with a
square cross-section is used for rolling into billets, rails, structural
sections, girders, merchant products etc. Rectangular shape, also
known as a slab, is suitable for rolling into flat products like
sheets, strips and plates. Round ingots are not used much but
can be used for tube making. Polygonal ingots are used for
tyres, wheels, forgings, etc.
...........................................................................................
16 Ex.Appeal No.79/09 & 76127/14 Narrow-Exemption Notification-dup moulds can be lifted from the lugs to strip the ingot off the mould easily and efficiently. This is used very commonly to produce rimming and semi-killed steel ingots for rolling. Some form of the insulated head to feed the pipe may be used or alternatively the head is left open to make an open-top mould for semi-killed steel ingots. For making a capped rimming steel ingot bottle-top mould is used.
Wide-end-up mould cannot be stripped off without the aid of additional mechanical arrangement. These are used to produce forging ingots of killed plain carbon or alloy steels. Open-bottom, closed-bottom and plugged-bottom types of wide-end-up moulds are also in use.
........................................................................................ 25.1 Types of Steel Molten steel contains dissolved gases, in particular oxygen. During cooling of steel the solubility of dissolved gases decreases and the excess comes out of solution. Of greater significance is the chemical equilibrium between carbon and oxygen dissolved in steel (see Section 4.2.1). The equilibrium shifts during cooling in such a way that the two react to form carbon monoxide gas which is expelled from steel."
13.8.2 The following extracts from the publication "The Making, Shaping and Treating of Steel", 10th Edition / Latest Technology, published by The Association of Iron and Steel Engineers, USA also show that ingot mould is an essential accessory:
INGOT SOLIDIFICATION Ingots - After a heat of steel is properly refined either in an oxygen- steelmaking furnace, an open-hearth furnace, or an electric furnace, the liquid steel is tapped into a refractory-lined open-topped vessel called a steel ladle. Alloying materials and deoxidizers may be added during the tapping of a heat. The steel ladle has an off-center opening in its bottom, equipped with a nozzle. Some ladles are equipped with a 17 Ex.Appeal No.79/09 & 76127/14 stopper-rod assembly and a mechanism called the ladle rigging for raising and lowering the stopper rod vertically to open and close the bottom hole. Other ladles employ a sliding gate mechanism by which the flow of steel from the ladle can be controlled externally by sliding a refractory plate with an opening to align the opening in the plate with the opening in the ladle bottom to permit steel to flow; flow can be stopped by sliding the plate so that the solid part of the plate covers the bottom opening. The ladle is moved by an overhead crane to a pouring platform where the steel is then poured or teemed into a series of molds of the desired dimensions. The steel solidifies in each of the molds to form a casting called an ingot. During the course of solidification and cooling, the surface of an ingot is colder than its interior. In fact, for some types of steel, the centers of ingots are still molten during the subsequent stripping operation, in which the molds are removed from the ingots. For other types they are permitted to stand for a period of time to ensure solidification before leaving the teeming area.
13.9 In the light of the aforesaid, the contention on behalf of the Revenue that steel making is possible without the ingot mould in the ingot process of steel making is unsustainable. It is relevant to state herein that no technical literature or authoritative material in support of this contention has been placed on behalf of the Revenue. On perusal of the statements of Amreekh Singh dated November 7, 2002 and November 16, 2002, along with his subsequent letter dated November 13, 2002 to the Superintendent (Adjn), we find that the contention of TSL thereon is correct. Hence, no reliance can be placed on the said statements without any independent corroboration, which is absent. 13.10 In the light of the abovestated we are of the view that TSL had correctly availed cenvat credit of the balance 50% of the duty paid on the ingot moulds in the subsequent years. The demands of Rs. 46,68,506/- in Appeal No. E/79/2009 and Rs. 29,26,764/- in Appeal No. E/76127/2014 in respect of cenvat credit on ingot moulds are therefore unsustainable.18
Ex.Appeal No.79/09 & 76127/14
14. Other goods involved in Appeal No. E/76127/2014. 14.1 These goods are detailed in Annexure-1 of the show cause notice dated May 23, 2003. Therein functions are also contained in the chart contained in TSL's reply to the show cause notice. 14.2 In the impugned order dated March 26, 2014, while dealing with item under Sl. No. 15 (DCS System), the Commissioner, inter alia, observed as follows (at page 9 of the order):
".................................................................................................... On perusal of relevant Delivery challan cum proforma invoices, submitted by TSL, I find that the impugned goods covered under chapter 85 may be usable as office equipments as well as in DCS system. The plea of TSL that the goods form part of DCS system is acceptable as at the time of verification by the Department, the departmental officer observed that the goods were found to part of the DCS system and are being used in connection with production of steel. Hence, credit on the same is available to them. I hold accordingly."
From Annexure-1 of the show cause notice against this Sl. No. 15 the amount of credit stated is a total of Rs. 5,43,414/- (Rs. 4,21,635/- + Rs. 73,444/- + Rs. 1,83,345/-). As per the impugned order itself, credit of this amount is available to TSL and therefore had been correctly availed and utilised. However it is seen that in the "ORDER" part credit of this amount has not been allowed by the Commissioner while allowing cenvat credit on three other items. This amount of Rs. 5,43,414/- contained in the total demand of Rs. 50,70,524/- confirmed by the impugned order is thus unsustainable.
14.3 In so far as electrodes covered under Sl. Nos. 36 and 37 of Annexure-1 of the show cause notice, we find, upon consideration of the submission made on behalf of TSL and upon perusing the sketch illustrating the above contained in the records of the present proceedings, that the functioning of the rolls for welding of which electrodes were used are components of slab caster, which itself formed a part of the LD-2 plant and thus is goods falling under Chapter 84 of the Central Excise Tariff.
19Ex.Appeal No.79/09 & 76127/14 Consequently, rolls are covered under Rule 2(b)(iii) of the Cenvat Credit Rules, 2002 as components of goods specified under Rule 2(b)(i). These electrodes which were used for welding the rolls are therefore "inputs" within the meaning of Rule 2(f) of the Cenvat Credit Rules, 2002 and credit of Rs. 7,83,542/- being the duty paid thereon had been correct availed by TSL. In the case of Commr. of Cus. C.Ex. & ST Vs. Singhal Enterprises Pvt. Ltd., 2018 (359) ELT 313 (Chattisgarh) the Division Bench of the Chattisgarh High Court, while deciding the issue as to whether the Tribunal was correct in holding the view that cenvat credit is admissible on welding electrodes as "input" in terms of Rule 2(k) of the Cenvat Credit Rules, 2004 when they were used for repair and maintenance purpose, as in the instant case, held that welding electrodes being used in manufacturing process was correctly considered by the Tribunal as "inputs" in terms of Rule 2(k) of the Cenvat Credit Rules. Following the said decision we hold that the demand of Rs. 7,83,542/- on the said welding electrodes covered under Sl. Nos. 36 and 37 of Annexure-1 of the show cause notice is erroneous and TSL was eligible to credit of the duty paid on them. 14.4 In so far as welding wires and rods covered under Sl. Nos. 5 to 8 of Annexure-I of the show cause notice, involving cenvat credit amount of Rs. 2.48 lakhs, we find that this issue is no longer res integra. In the case of National Co-operative Sugar Mills Ltd. Vs. Commr. of C.Ex., 2016 (344) ELT 832 (Mad) it has been held by the Hon'ble Division Bench of the Madras High Court as follows:
"15. After considering Commissioner v. Jawahar Mills Ltd. reported in 2001 (132) E.L.T. 3 (S.C.), Jaypee Rewa Plant vs. CCE reported in 2003 (159) ELT 553 (Tri-LB), J.K. Cotton Spinning and Weaving Mills Co. Ltd. vs. Sales Tax Officer reported in 1997 (91) E.L.T.34 (S.C.), in Ambuja Cements Eastern Ltd. vs. Commissioner of Central Excise, Raipur reported in 2010 (256) E.L.T. 690 (Chhattisgarh), wherein, the High Court of Chhattisgarh held that welding electrodes used for repair and maintenance of plant and machinery, are eligible for cenvat credits, both as capital goods, as well as inputs. At this juncture, we also deem 20 Ex.Appeal No.79/09 & 76127/14 it fit to consider the Judgment of Chhattisgarh High Court, as to how the decision in SAIL case has been distinguished. At Paragraph Nos.13, 14, 16, 17, 21 and 22 and ultimately, at paragraph 23, relying on the decision of the Rajasthan High Court in Hindustan Zinc Ltd. v. Union of India reported in 2008 (228) E.L.T. 517 (Raj.), Commissioner of Central Excise vs. India Cements Limited reported in 2009 (238) E.L.T. 411 (Mad.) and the decision of the Delhi Tribunal in Birla Jute & Industries Limited reported in 2002 (139) E.L.T. A93, and subsequently, confirmed by the Hon'ble Apex Court, the Chhattisgarh High Court, allowed the appeals of the assessee, and answered the substantial question of law, raised therein viz., whether the welding electrodes used in repairs/maintenance of plant and machinery can be construed as input, as defined under Rule 2(g) of the Cenvat Credit Rules, 2002. The Hon'ble Division Bench of the Chhattisgarh High Court further held that welding electrodes used in repairs and maintenance of plant and machinery are inputs as defined under Rule 2(g) of the Cenvat Credit Rules, 2002 and thus, entitled for cenvat credit. Relevant paragraphs in the said judgment are extracted hereunder:
'13. The decision in Jaypee Rewa Plant came into consideration before the Rajasthan High Court in the matters of Hindustan Zinc Ltd. [2008 (228) E.L.T. 517 (Raj.)], involving similar issue - "Whether welding electrodes used for repair and maintenance of plant and machinery are eligible for cenvat credits, both as capital goods as well as inputs?" The High Court relying upon the decision of the Supreme Court in case of Jawahar Mills Ltd., in Paras 11 & 12 observed as thus:
'11. In our view, the Judgment of Hon'ble Supreme Court, in J.K.Cottons SPG & WVG Mills Co. Ltd v. Sales Tax Officer, Kanpur, reported in 1997 (91) E.L.T. 34, has a material bearing on the controversy involved in the present case. It may be noticed, that the Tribunal in J.P.Rewa case has referred to this judgment of the Hon'ble Supreme Court in J.K.Cotton's case, by reproducing a part of the head note, but then, the very significant continuing next sentence has been 21 Ex.Appeal No.79/09 & 76127/14 omitted from consideration, inasmuch as the sentence following the portion quoted by the Tribunal, is as under:
'They need not be ingredients or commodities used in processes, nor must they be directly and actually needed for 'turning out or the creation of goods'.'
12. In that case, 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 carry on the manufacturing process. Thus, with the above, if the quoted part of the judgment in J.K.Cotton's case is read, it becomes clear, that 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'.
14. The Madras High Court in India Cements Ltd., while dealing the similar issue, relying upon the decision of the Supreme Court in Jawahar Mills Ltd. and Commissioner v. Birla Jute & Industires Ltd., decided the question of law in favour of the assessee and held that the Tribunal is correct in holding that the welding electrodes used for repairs and maintenance are covered under the definition of capital goods in terms of Rule 57Q of the Central Excise Rules, 1944.
..................
...................
16. The Northern Bench of the Tribunal, New Delhi, in the matter of Birla Jute & Industries Ltd., held that modvat credit is admissible for Electrodes and Calibration Gas Mixture (welding equipments), but not 22 Ex.Appeal No.79/09 & 76127/14 admissible for explosives under Rule 57A of the Central Excise Rules, 1944.
Civil Appeals preferred by the revenue against the above order were again dismissed by the Supreme Court with an observation that the civil appeals have to be dismissed in view of the judgment of this Court in Jawahar Mills Ltd. (Commissioner v. Birla Jute & Inds. Ltd.).
17. The Kolkata Tribunal in the matter of SAIL held that modvat Credit on goods and welding electrodes etc. which are used for welding, repaid and maintenance of machineries, is not admissible. Relying upon the decision in Jaypee Rewa Plant, it has been observed that the decision in this matter has not been appealed against or reversed. SAIL filed a petition for special leave to appeal against the above decision and dismissing the SLP, the Supreme Court passed the following order:
'Delay condoned.
On the facts of this case, matters stand dismissed.' [Steel Authority of India Ltd. v. Commissioner - 2008 (229) E.L.T. A127 (S.C.)] .................................................................................................... .......................
.............................................................................................
21. Shri Bhishma Kinger, learned counsel for the respondents/revenue, vehemently argued that in the matter of SAIL, the Tribunal at Kolkata relying upon the decision in Jaypee Rewa Plant has held that modvat credit on goods and welding electrodes etc. which are used for welding, repairing and maintenance of machineries, is not available under Rule 57A of the erstwhile Central Excise Rules, 1944. SAIL's Special Leave Petition against the above order of Kolkata Tribunal has been further dismissed and therefore, the view taken in Jaypee Rewa Plant is impliedly affirmed by the Supreme Court.23
Ex.Appeal No.79/09 & 76127/14 We are unable to accept the aforesaid argument as we find that SLP against the decision of Kolkata Tribunal in SAIL has been summarily dismissed without any speaking order, whereas the Rajasthan High Court in Hindustan Zinc Ltd., after considering the Larger Bench decision of the Tribunal in Jaypee Rewa Plant, has observed that the matter has been decided by selectively referring to the decision of the Supreme Court in J.K.Cotton's case, and decided the matter by omitting the very significant continuing next sentence. Paras 11 & 12 of Hindustan Zinc Ltd. have already been reproduced in the foregoing paragraph for ready reference.
22. Thus, decision in the matter of Jaypee Rewa Plant is not a good law in view of above judgment of the Rajasthan High Court. That apart, the Madras High Court in India Cements Ltd. has held that the welding electrodes used for repairs and maintenance are covered under the definition of capital goods in terms of Rule 57Q. Similarly, in Birla Jute & Industries Ltd., also, the Delhi Tribunal held that modvat credit is admissible for Electrodes and Calibration Gas Mixture (Welding equipments), but not admissible for explosives under Rule 57A of the Central Excise Rules, 1944, Civil appeals preferred by the revenue have been further dismissed by the Supreme Court.
It is settled law that refusing of special leave to file appeal by a non- speaking or speaking order does not attract the doctrine of merger, whereas where an award, appeal or revision is provided against the order passed by the Court, Tribunal or any other authority before a superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law, as held by the Supreme Court in Kunha Yammed.
23. On the basis of aforesaid discussions, relying upon the decision of the Rajasthan High Court in Hindustan Zinc Ltd., Madras High Court in India Cement Ltd., and 24 Ex.Appeal No.79/09 & 76127/14 Delhi Tribunal in Birla JUte & Industries Ltd., which have been subsequently affirmed by the Supreme Court, we allow both the appeals, set aside the impugned orders and answer the substantial question of law in favour of the appellant-assessee and hold that welding electrodes used in repairs and maintenance of plant and machinery are inputs as defined under Rule 2(g) of the Cenvat Credit Rules, 2002 and thus, entitled for cenvat credit.'
16. On the aspect, as to how the word 'input' in Rule 2(g) of Cenvat Rules, 2002 has to be understood, the Hon'ble Supreme Court in Maruti Suzuki Ltd. vs. Commissioner of Central Excise, Delhi-III reported in 2009 (240) E.L.T. 641 (S.C.), at paragraph nos.9, 10, 12, 14 and 16 held as hereunder:
'9. Coming to the statutory definition of the word "input" in Rule 2(g) in the CENVAT Credit Rules, 2002, it may be noted that the said definition of the word "input" can be divided into three parts, namely:
(i) Specific part
(ii) Inclusive part
(iii) Place of use
10. Coming to the specific part, one finds that the word "input" is defined to mean all goods, except light diesel oil, high speed diesel oil and 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. The crucial requirement, therefore, is that all goods "used in or in relation to the manufacture" of final products qualify as "input". This presupposes that the element of "manufacture" must be present.
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25Ex.Appeal No.79/09 & 76127/14
12. In the case of Union Carbide India Ltd. v. Collector of Central Excise, Calcutta-1 reported in 1996 (86) E.L.T. 613 (Tri) a Larger Bench of CEGAT observed that a wide impact of the expression "used in relation to manufacture" must be allowed its natural play. Inputs (raw materials) used in the entire process of conversion into finished products or any other process (like electricity generation) which is integrally connected with the ultimate production of final product has to fall within the above expression. It was observed that the purpose was to widen the scope, ambit and content of "inputs". According to the Special Bench of CEGAT, the purpose behind the above expression is to widen the ambit of the definition so as to attract all goods, which do not enter directly or indirectly into the finished product, but are used in any activity concerned with or pertaining to the manufacture of the finished product.
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.............
14. In the case of Collector of Central Excise, New Delhi v. M/s.Ballarpur Industries Ltd. reported in (1989) 4 SCC 566 the difference between the expression "used in the manufacture" and "used as input (raw material)" was highlighted. In that judgment, it was held that undoubtedly the said two expressions are distinct and separate, but, when an ancillary process (like electricity generation) aids the making of an end product, then, the ancillary process gets integrally connected to the end product. In the said judgment, this court applied what is called as "the dependence test". It may, however, be noted that in the definition of "input" the expression "used in or in relation to the manufacture of final product" is not a standalone item. It has to be read in entirety and when so read id reads as "used in or in relation to the manufacture of final product whether directly or indirectly and whether contained in the final product or not". These words "whether directly or indirectly" and "whether contained in the final product or not" indicates the intention of the legislature. What the legislature intends to say is 26 Ex.Appeal No.79/09 & 76127/14 that even if the use of input (like electricity) in the manufacturing process is not direct but indirect still such an item would stand covered by the definition of "input". In the past, there was a controversy as to what is the meaning of the word "input", conceptually. It was argued by the Department in a number of cases that if the identity of the input is not contained in the final product then such an item would not qualify as input. In order to get over this controversy in the above definition of input, the Legislature has clarified that even if an item is not contained in the final product still it would be classifiable as an "input" under the above definition. In other words, it has been clarified by the definition of "input" that the following considerations will not relevant:
(a) use of input in the manufacturing process be it direct or indirect;
(b) even if the input is not contained in the final product, it would still be covered by the definition.
These considerations have been made irrelevant by the use of the expression "goods used in or in relation to the manufacture of final product" which, as stated above, is the crucial requirement of the definition of "input". Moreover, the said expression, viz., "used in or in relation to the manufacture of the final product" in the specific/substantive part of the definition is so wide that it would cover innumerable items as "input" and to avoid such contingency the Legislature has incorporated the inclusive part after the substantive part qualified by the place of use. For example, one of the categories mentioned in the inclusive part is "used as packing material". Packing material by itself would not suffice till it is proved that the item is used in the course of manufacture of final product. Mere fact that the item is a packing material whose value is included in the assessable value of final product will not entitle the manufacturer to take credit. Oils and lubricants mentioned in the definition are required for smooth running of machines, hence they are included as they are used in relation to manufacture of the final product. The intention of the Legislature is that 27 Ex.Appeal No.79/09 & 76127/14 inputs falling in the inclusive part must have nexus with the manufacture of the final product.
............
............
16. In our earlier discussion, we have referred to two considerations as irrelevant, namely, use of input in the manufacturing process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression "used in or in relation to the manufacture of final product". Similarly, we are of the view that consideration such as input being used as packing material, input used as fuel, input used for generation of electricity or steam, input used as an accessory and input used as paint are per so also not relevant. All these considerations become relevant only when they are read with the expression "used in or in relation to the manufacture of final product" in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression "used in or in relation to the manufacture" have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition 28 Ex.Appeal No.79/09 & 76127/14 would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In our view, one has to therefore read the definition in its entirety.'
17. Attention of this court is also invited to another decision of the Madras High Court in Commissioner of Central Excise, Trichy vs. CESTAT, Chennai reported in 2014 (309) E.L.T. 71 (Mad.), wherein, the Department has challenged the decision of the Tribunal, allowing credit on steel wire, rope, MS welding electrodes, etc. Taking note of the decision in Commissioner of Central Excise v. Madras Aluminium Co. Ltd. reported in 2008 (226) E.L.T. 342 (Mad.), at paragraph 16, the Hon'ble Division Bench of this Court, held hereunder:
'16. As far as item Nos.(v), (vi), (vii), (viii), (ix) and (x) MS Plates various sizes, Oxygen Gas, Acetylene Gas, MS welding electrodes, Aluminium Welding wire and CI Welding wire are concerned, these inputs were under the consideration of Tribunal's decision in the assessee's own case reported in 2001 (136) E.L.T. 182 (Tribunal- Chennai) (MALCO v. CCE, Coimbatore) which is subsequently confirmed by the Division Bench of this Court in the case reported in 2008 (226) E.L.T. 342 (Madras), CCE v. Madras Aluminium Ltd. Therefore, these items are also eligible for credit.'
18. As rightly contended by Mr. N. Prasad, learned counsel for the appellant, the term 'inputs', is wide enough to cover all the goods, except the goods specifically mentioned in the definition, inputs used in or in relation to the manufacture of the final product, whether directly or indirectly or whether it contained the final products or not. Judicial pronouncements extracted supra, make it abundantly clear that welding electrodes used for repair and maintenance of machineries, in relation to manufacture of the final product, namely sugar, is eligible for cenvat credit.
29Ex.Appeal No.79/09 & 76127/14
19. Though Mr. A. P. Srinivas, learned Senior Standing Counsel for Central Excise made submissions to sustain the order of the Tribunal impugned before us, in the light of the discussion and decisions extracted, directly applicable to the case on hand, we are not inclined to accept the same.
20. The substantial question of law raised in the appeal whether the Hon'ble Customs, Excise and Service Tax Appellate Tribunal committed an error of law in disallowing the cenvat Credit on welding rods/electrodes used by the appellants when, in fact, the same were used in and/or in relation to manufacture of the final produce as required by Rule 2(k) of the Cenvat Credit Rules, 2004?, is answered, in the affirmative, in favour of the appellant/assessee."
14.4.1 In the case of ACC Limited Vs. Commissioner of Central Excise, 2018 (361) ELT 343 (Bom) the Hon'ble Bombay High Court has referred to and followed the decisions of the Rajasthan High Court in the case of Hindustan Zinc Ltd. Vs. Union of India, 2008 (228) ELT 517 and the Chattisgarh High Court in the case of Ambuja Cement Vs. Commissioner of Central Excise, 2010 (256) ELT 690, in which the Larger Bench decision of the Tribunal in Jaypee Rewa Plant Vs. Commissioner, 2003 (159) ELT 553 (T-LB) was held to be no longer good law and overruled.
14.4.2 Respectfully following the above decisions considering and the use of the welding wires and rods, we are of the view that TSL had correctly availed cenvat credit on the said welding wires and rods amounting to Rs. 2.48 lakhs.
14.5 The fact that TSL had declared the subject goods as capital goods cannot prohibit them from claiming cenvat credit on the ground that they were inputs within the meaning of the Cenvat Credit Rules so long it is able to establish the use of such goods in or in relation to manufacture of final products in the factory, whether directly or indirectly. This stands settled by the decision of the Larger Bench in the case of Commissioner of Cus. C.Ex. Vs. Modi Rubber Ltd., 2000 30 Ex.Appeal No.79/09 & 76127/14 (119) ELT 197 (T-LB). In para 21 of the order it has been observed and held as under:
"21. In appeal No. E/1814/97-NB, we find that the question whether modvat credit on lubricants as inputs under Rule 57 A is liable to be allowed where the goods are declared as capital goods under Rule 57Q instead of as inputs under Rule 57A is also involved. We note that a similar question was considered by a Two-Member Bench of this Tribunal in the case of Devyani Beverages Ltd. v. CCE, Meerut, 1999 (33) RLT 73 wherein the Bench held that the declaration filed by the assessee in terms of Rule 57Q was sufficient for the purpose of extending credit on glass bottles which were inputs within the meaning of Rule 57A. We also hold similar view in the instant case and sustain the appellant's challenge against the impugned order of the Commissioner (Appeals) denying modvat credit on the ground that the declaration was not in terms of Rule 57A. The appeal is, therefore, allowed."
In the instant case from the materials on record it is found that electrodes, electrode wires and rods were all used, though indirectly, in the manufacture of final product in TSL's factory. Hence, though declared as "capital goods", these goods are eligible to cenvat credit as "input" under Rule 2(g) of the Cenvat Credit Rules, 2002. 14.6 In so far as the remaining goods are concerned, considering the small amounts involved, the learned Counsel on behalf of TSL has submitted that he does not want to press the same.
15. Therefore, in Appeal No. E/76127/2004 out of the total demand of Rs.
50,70,524/- confirmed, the demand of Rs. 45,01,720/- (Rs. 29,26,764/- + Rs. 5,43,414/- + Rs. 7,83,542/- + Rs.2,48,000/-) is unsustainable and is set aside. The penalty of Rs. 5 lakhs imposed is not imposable in the facts and circumstances of the instant case and is set aside. The order dated March 26, 2014 passed by the Commissioner of Central Excise & Service Tax, Jamshedpur is modified accordingly and the appeal of TSL against the same is allowed partially to the extent abovestated.
31Ex.Appeal No.79/09 & 76127/14 15.1 The order dated December 16, 2008 passed by the Commissioner (Appeals), Central Excise, Ranchi in Appeal No. E/79/2009 is upheld and the appeal of the Revenue against the same is rejected. 15.2 Both the appeals are disposed of accordingly.
(Pronounced in the open court on 18.12.2019) Sd/ (P. K. Choudhary) Member (Judicial) Sd/ (Bijay Kumar) Member (Technical) mm