By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Welding electrodes used for repair and maintenance of plant and machinery are inputs and covered by the expression in or in relation to manufacture – Held, CENVAT Credit allowed.
Facts:
The appellant, a manufacturer of sugar and molasses took credit of welding electrodes used for repair and maintenance of plant and machinery. The department denied the said credit relying upon the judgment of Tribunal in case of 2008 taxmann.com 532 (Kol-CESTAT) SAIL vs. CCE on the ground that SLP filed against Tribunal’ decision was dismissed by the Apex Court vide judgment reported in 2002 (139) ELT A-294 (SC). Assessee contended that regular repair and maintenance of plant and machinery was necessary for smooth manufacturing operation and therefore the impugned order disallowing credit was not justified.
Held:
The Tribunal observed that the definition of input during the period of dispute, as given in Rule 2(k) of the CCR, covered all the goods which are used in or in relation to manufacture of final products whether directly or indirectly and whether contained in the final product or not. It held that, the expression “used in or in relation to manufacture of final products whether directly or indirectly” is obviously wider in scope than the expression “used in the manufacture of”, as the former expression expands scope of the latter expression. The Tribunal relied upon the decision in the case of 1997 (91) ELT 34 (SC) J. K. Cotton Spinning & Weaving Mills Co. Ltd. vs. Sales Tax Officer to hold that 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. Tribunal observed that it is nobody’s case that manufacturing activity is commercially feasible with malfunctioning machinery, and leaking pipes, tubes and tanks and accordingly held that 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.
