Cenvat Credit on welding electrodes used in Repair and Maintenance of plant and machinery

PJ/Case Laws/2011-12/1441

Cenvat Credit on welding electrodes used in Repair and Maintenance of plant and machinery – availability of.

Case: L. H. Sugar Factory Ltd. versus Commissioner of C. Ex., Meerut – II

Citation: 2011 (272) E.L.T. 275 (Tri. – Del.)

Issue:- Cenvat Credit on welding electrodes used in Repair and Maintenance of plant and machinery – availability of.

Appeal filed by Revenue before the Tribunal without permission of Review by Committee of Two Commissioners – whether proper and correct?

Brief Facts:- Assessee is a manufacturer of sugar. They availed cenvat credit on welding electrodes as capital goods as the same were used in repair and maintenance of their plant and machinery which are covered under the definition of capital goods. They also availed cenvat credit on Steel plates, HR sheets, Section etc. which were used for repair of their plant and machinery which has become obsolete.

The Adjudicating Authority confirmed the demand along with interest and equivalent amount of penalty on the assessee.

Assessee filed appeals before the Commissioner (Appeals) who allowed the cenvat credit on Steel plates, HR shapes and sections etc but disallowed cenvat credit availed by the assessee on welding electrodes.

Aggrieved from the said order, both the parties are in appeal before this Tribunal.

Appellant’s Contention:- Assessee submits that cenvat credit on welding electrodes which are used for repair and maintenance of plant and machinery has been allowed by the High Court of Chattisgarh recently in the case of Ambuja Cements Eastern Ltd. v. CCE, Raipur [2010 (256) E.L.T. 690 (Chatt.)] and the same view has been taken by the High Court of Karnataka in the case of CCE, Bangalore v. Alfred Herbert (India) Ltd [2010 (257) E.L.T. 29 (Kar.)]. Accordingly, they are entitled to avail cenvat credit on welding electrodes which are used for maintenance and repair of plant and machinery as capital goods or inputs.

Assessee took a preliminary objection to the appeals filed by the Revenue saying that a proper approval of Review Committee has not been obtained by the Department before filing the appeal before this Tribunal as the Review consists of two Commissioners but the Review has been made only by one Commissioner who was holding additional charge of Second Commissioner. As it is not the decision of the Committee of two Commissioners and it is decision of one Commissioner and hence appeal is not maintainable before this Tribunal as per Section 35 of the CEA, 1944.

Respondent’s Contention:- Revenue submitted that the Apex Court in the case of SAIL [2008 (229) E.L.T. Al27 (S.C.)], the Apex Court disallowed the cenvat credit on welding electrodes which are used for repair and maintenance of machinery and same view has been dealt with by the President of this Tribunal in the case of Oswal Overseas Ltd. v. CCE, Meerut-II [2010 (254) E.L.T. 338] wherein it was held that electrodes are consumable items which lost their identity and existence in their use, items could not be accessories and are not covered under Rule 2(a)(A) of Cenvat Credit Rules, 2004.

Reasoning of Judgment:- With regard to the issue of welding electrodes, the Tribunal held that the decision of the Apex Court in the case of SAIL involved the period prior to 2000 wherein the earlier provision of modvat credit rules were available and in the case of Alfred Herbert (India) Ltd, the High Court of Karnataka has dealt with the issue and held that the decision of SAIL is not applicable after 2000 when the amendment in the Cenvat Credit Rules, 2000 took place. The decision of the President of this Tribunal is prior to the decision of the Karnataka High Court and the Chattisgarh High Court. Hence following the judicial discipline, the Tribunal is bound to follow the decision delivered by the High Court. Moreover, in view of the above discussion, the assessee is entitled to availment of cenvat credit on welding electrodes, which are being used in maintenance of plant and machinery as capital goods or inputs.

On the issue of obtaining permission of Committee of two Commissioners for filing appeal by Revenue before the Tribunal, the Tribunal noted that Section 35 (B) (I) (b) (clause ii) provides that every Committee constituted under Section (i) (sic) was consisted of two Commissioners. According to the said provision, there must be two persons or two Commissioner or Chief Commissioners to review the order placed before them and to arrive at a decision whether the appeal is to be filed or not. It was noted that in this case, although the Commissioner of Central Excise Meerut-I was holding the additional charge of Commissioner of Central Excise Meerut-II but that cannot be termed as a Committee of Commissioners constituted in the provisions of law. Hence, preliminary objection taken by assessee was valid objection. Appeals filed by Revenue not proper and correct as no proper permission from the Committee of Commissioners to file appeals before this Tribunal.

Decision:- Assessee’s appeal allowed. Revenue’s appeal dismissed.

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PJ/Case Laws/2011-12/1441

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