Customs, Excise and Gold Tribunal - Bangalore
Commr. Of C. Ex. vs Panyam Cements And Minerals Indus. Ltd. on 26 December, 2002
Equivalent citations: 2003(160)ELT278(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. The issue in this appeal involves eligibility of Modvat Credit on Welding Electrodes. After hearing both sides, I find that the Commissioner (Appeals) in Para 3 of the order held that -
"3. The appellants on their detailed grounds of appeal contended that -
(a) The order of Original Authority disallowing Modvat credit on welding electrodes on the ground that these are used for maintenance and not used for production or processing of any goods or for bringing about any change in substance does not stand to reason. In fact Commissioner (Appeals) vide Order-in-Appeal No. 234/97, dtd. 7-10-97 has held that 'Arc-welding electrodes' are undoubtedly eligible for Modvat credit under Rule 57Q. As a matter of fact even earlier there were allowed for Modvat credit under Rule 57A as 'inputs'. Hence, Assistant Commissioner's order in disallowing Modvat credit on 'Arc-Welding Electrodes' is not correct and not in accordance with the decisions of higher appellate authorities directions and hence not sustainable.
(b) As regards Steel Tubes and Pipes on the ground that these are accessories of the D.G. set and are not used for production or processing of goods is not correct for the reasons submitted in reply to the Show Cause Notice. The same Assistant Commissioners in his earlier Order-in-Original No. 35/97 (AC) has allowed Modvat credit on 'ERW - Steel Tubes'. Even otherwise under Clause (g) of the explanation for the Capital goods under Rule 57Q Tubes and Pipes of Iron and Steel are entitled for Modvat credit under Rule 57Q, if they are used in the factory of manufacturer. This is in conformity with the wordings of Rule 57Q as it stood at relevant period contemplated only the use of capital goods by the manufacturer in his factory and specify the conditions that they are to be used for production of processing of goods. Hence, Modvat credit eligible on these Steel Tubes and Pipes.
(c) As regards Plain Plates, channels and Angles and Joists, by virtue of the fact that these items are used in fabrication of Dust Collector system (due to regulations of pollution control board) which in turn is used in the production or processing of goods are eligible for Modvat credit. Even though these facts were brought to the notice of the Original Authority vide their letter dated 21-7-97 the same have not been considered by the adjudicating authority and hence action of Assistant Commissioner in disallowing Modvat credit on these items is not justified and reasonable. For the reasons and grounds stated above the Modvat credit on the above various items was availed correctly and hence there was no contravention of any Modvat Rules and therefore imposition of penalty under Rule 57Q by the Original Authority is not correct and legal and does not arise.
Accordingly the appellants pleaded to set aside the Order-of-Original Authority and to hold that the credit is admissible to the appellants on the impugned goods under Rule 57Q."
and allowed the appellants to avail Modvat credit on the impugned item namely, Welding Electrodes.
3. The Revenue has come in appeal on the ground that Welding Electrodes used in the maintenance of machineries and welding of the machinery parts cannot be considered as capital goods under Rule 57Q of Central Excise Rules, 1944 and has relied upon the decisions of the Tribunal in the case of Kanoria Sugars and General Manufacturing Co. v. Commissioner of Central Excise reported in 1996 (87) E.L.T. 522 wherein it was held that the Welding Electrodes used only in the maintenance purpose are not eligible for Modvat credit. Similarly the Revenue also relied upon the decisions in the case of Century Cement v. Commissioner of Central Excise, Raipur reported in 1997 (95) E.L.T. 69 (T) wherein Modvat credit has been disallowed on Acetylene Gas and Oxygen Gas used for the purpose of welding of the machines. On the same analogy Modvat credit cannot be allowed on the Welding Electrodes as capital goods under Rule 57Q of Central Excise Rules, 1944.
4. The ld. Departmental Representative for Revenue relied upon the decisions of the Tribunal in the case of K.L. Rathi Steels Ltd. v. Commissioner of Central Excise, Delhi-I reported in 2000 (121) E.L.T. 843 (Tribunal) as well as in the case of Commissioner of Central Excise, Belgaum v. Bellary Steels & Alloys Ltd. reported in 2001 (130) E.L.T. 873 (Tri. - Chennai).
5. The learned Advocate for the Respondents submitted that the availment of Modvat credit is permissible in this case and relies upon the Final Order No. 3089/1999 dated 3-12-99 of the Tribunal South Zonal Bench, Chennai in the assessee's own case wherein relying upon Para 40 of the decisions of the Larger Bench in Jawahar Mills - 1999 (108) E.L.T. 47 (T) holding that wires and cables as well as welding electrodes would be eligible to Modvat credit under Rule 57Q. Accordingly the Revenue appeal was rejected. The Counsel insisted that the said order of the Tribunal's South Zonal Bench, Chennai is final.
6. After considering the submissions made by both sides and submissions made by the assessee that Welding Electrodes were used in maintenance of machinery and therefore the party availed Modvat credit under Rule 57Q of Central Excise Rules, 1944 and on perusal of Para 40 of Larger Bench decisions in Jawahar Mills, (supra), I find that Welding Electrodes are eligible capital goods. However the issue whether capital goods when used for maintenance purpose would be eligible for Modvat credit was not decided in the Jawahar Mills case. Therefore with due respect to the Order of the Tribunal's Chennai Bench Final Order No. 3089/1999, dated 3-12-99 where goods are wires and cables as well as welding electrodes, I am not able to follow that order in this case. I would follow the order of the decisions of the Tribunal in the case of Bellary Steels & Alloys Ltd. [2001 (130) E.L.T. 873] wherein it was held that Welding Electrodes used for repairing damaged/worn out parts of machinery are not eligible for Modvat credit. Perusal of Rule 57Q and its interpretations from its introduction till date as recorded in the Jawahar Mills case by the Larger Bench would indicate to me that goods used for maintenance was never the issue covered in that case in Modvat claims under Rule 57Q.
7. Since the Welding Electrodes are used for maintenance of the machinery which used to manufacture of the Calcium Carbide, I would come to a finding that such Welding Electrodes which are used for maintenance of capital goods, are not eligible for Modvat credit. The Respondents have also pointed out that penalty of Rs. 4,000/- was imposed by the Original Authority which was set aside in appeal. Since they have availed Modvat credit and the notices were issued without invoking any serious misconduct on their part the inputs on which eligibility of Modvat credit under Rule 57Q was not settled, till the time of the decisions arrived in the case of Jawahar Mills (supra) and certain issues which are not as yet clear as reference are pending with High Court, I would not find any justification for penalty.
8. In view of my findings, the Revenue appeal is allowed only with regard to eligibility of Modvat credit on Welding Electrodes used for maintenance of machinery by coming to a finding that such Welding Electrodes are not eligible inputs under Rule 57Q of the Central Excise Rules, 1944. Accordingly the Revenue's appeal is partially allowed.