Whether ROM application allowable if decision rendered on wrong facts of the case?

PJ/Case Law/2013-14/1948

Case:- COMMISSIONER OF C. EX., CHENNAI-IV Vs DELPHI TVS DIESEL SYSTEMS LTD.

Citation:- 2013 (295) E.L.T. 402 (Tri. - Chennai)

Brief facts:- The assessee has filed the application for rectification of mistake perceived by them in Final Order No. 1212/2011, dated 2-11-2011 issued by the Tribunal by which an appeal filed by Revenue was allowed. The issue involved in the appeal was whether Cenvat credit could be taken on “electrodes” used by the applicant in their factory. In the impugned final order, the Tribunal had given a finding that the welding electrodes in question were used in repair and maintenance of the machinery and hence Cenvat credit of duty paid on such items could not be allowed.

Appellant’s contention:- The applicant submitted that in the first place, the goods were not ‘welding electrodes’ but only ‘electrodes’ and these electrodes were used in manufacturing machinery as had been submitted during the adjudication stage and recorded in one of the many unnumbered paragraphs of the adjudication order. The same was reproduced as below :-
“To decide the eligibility of the goods as “capital goods”, I consider the question of classification of the said “electrodes”. I find that the assessee has submitted a detailed description of the goods and its usage in the manufacture of Nozzle by Electro Chemical Machine (ECM) and Electro Discharge Machine (EDM). According to the assessee, in the process, the electrode work piece is first machined by electrical discharges occurring across a dielectric fluid and the same subsequently subjected to a finishing pass in a course of which it is machined by electrochemical machining (ECM) through a conductive electrolyte replacing the dielectric fluid.”
The manner in which the electrodes were used was also recorded in another paragraph which also was reproduced as below :-
“Chapter sub-heading 8456 reads as “Machine-tools for working any material by removal of material, by laser or other light or photon beam, ultra-sonic, Electro discharge, Electro-chemical, Electron beam, Ionic-beam or plasma are processes”. Chapter Sub-heading 8466 reads as “Parts and accessories suitable for use solely or principally with the machines of Headings 8456 to 8465, including work or tool holders, self-opening die heads, dividing heads and other special attachments for machine-tools; Tool holders for any type of tool, for working in the hand”. As seen from the write up given for usage of the said electrode and from the description of chapter sub-heading Nos. 8456 & 8466, I find that the impugned electrodes can well be fitted into chapter sub-heading 8466 as parts suitable for use solely with the machines of heading No. 8456. Thus, I conclude that the classification of the electrodes is to be rightly done under chapter sub-heading 8466 of Central Excise Tariff Act, 1985, as per rule 1 of interpretative rule mentioned above. Even without going into the merits of the classification of the electrode, it is a fact that they are used in conjunction with the electro chemical machines rightly falling under CETH 8456.”
From the above mentioned paragraphs, appellant made it very clear that the goods involved were not ‘welding electrodes’ which were used in maintenance and repair of machinery. These facts were not controverted in proceedings at higher levels. Tribunal, based on no records or findings, presumed erroneous facts which led to erroneous decision and as these facts are apparent on record, it should be rectified.

Respondent’s contention:- The ld. AR for appellant submitted that application was beyond the scope of rectification of mistake. He relied on the decisions of C.C.E., Surat v. Shree Ganesh Khand Udyog Sohakori Mandli Ltd. - 2010 (253)E.L.T.313 (Tri.-Ahmd.) and C.C.E., Mumbai v. RDC Concrete (India) P. Ltd. - 2011 (270)E.L.T.625 (S.C.).

Reasoning of judgment:- After considering the submissions from both sides Hon’ble judge held that the facts involved in the case law cited by Revenue were not same as the one involved in the facts of present case before him. In the case concerned, the wrong facts were taken on record, without indicating the source, in the Tribunal’s final order. So it was only proper that such mistake in finding of fact and consequent decision were rectified. Therefore, he recalled the impugned order.
Further, he had heard both sides on the merits of the issue. He found that these electrodes were not usual welding electrodes about which there was dispute whether Cenvat credit could be allowed or not. These electrodes form part of the machinery itself and therefore he was in agreement with the findings of both the lower authorities. So he upheld the order of the lower authorities and allowed Cenvat credit on the items concerned.

Decision:- ROM application was allowed.

Comment:- The gist of the case is that ROM application is sustainable even if decision has been rendered on erroneous facts and findings. In the present case, the revenue appeal was allowed on the fact that welding electrode were used for repair and maintenance of machinery whereas in reality they were ‘electrodes’ used in manufacturing of machinery and formed part of machinery itself. Accordingly, the credit was allowed and the revenue appeal was dismissed.

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PJ/Case Law/2013-14/1948

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