JAYPEE REWA PLANT Vs. CCE

JUDGEMENT

(1.) THE issue referred to us is whether CENVAT credit was admissible under Rule 57AA of the Central Excise Rules 1944 to Welding Electrodes and gases (Oxygen and dissolved Acetylene) which were used by the appellants during April to September 2000 for repairs and maintenance of machines, equipments, structurals etc. in their factory. There are conflicting decisions on similar issue by co -ordinate 2 -Member Benches of this Tribunal as noted in the referral order, The East Zonal Bench, in Associated Cement Co. Ltd. v. CCE, 1991 (55) ELT 415, disallowed MODVAT credit to the assessee under Rule 57A of the Central Excise Rules, 1944 in respect of Oxygen gas and Dissolved Acetylene gas which were used for repairs of their Cement manufacturing plant. It was held that the said gases were not eligible 'inputs' as they were not used in or in relation to the manufacture of cement (final product). In the case of K.L. Rathi Steels Ltd. v. CCE, 2000 (121) ELT 843, a co -ordinate Bench at New Delhi denied MODVAT credit to the appellants therein under Rule 57A ibid in respect of Welding electrodes used for the purpose of repairs and maintenance of machinery in their factory. In the present case, the Commissioner of Central Excise has followed the ratio of the above decision, to deny CENVAT credit (Rs. 1,49,101) under Rule 57AA ibid to M/s Jaypee Rewa Plant (appellants) in respect of their Welding electrodes and gases for the period April to September 2000. The contrary decision of the Tribunal; noted by the Referring Bench, is the one rendered by the South Zonal Bench (Chennai) in ACC Ltd. v. CCE, 1999 (108) ELT 477 wherein it was held that Oxygen and Dissolved Acetylene which were used for repairs and maintenance of 'Raw Mill' and 'Cement Mill' in the assessee's factory were eligible inputs for MODVAT credit under Rule 57A.

(2.) HEARD Shri B.L. Narasimhan, counsel for the appellants and Shri A.S. Bedi, Sr. Departmental Representative. Learned counsel, apart from relying on the SZB's decision on ACC Ltd. v. CCE, 1999 (108) ELT 477, cited CBEC Circular No. 31/90 -CX -8 dated 31.5.90 [F. No. 267/108/89 -CX 8] wherein the Board had directed that MODVAT credit for inputs be allowed "on the Oxygen and Acetylene gases used for cutting runners and risers in the castings and for welding purposes and similar process of cutting and welding". He also submitted that the Supreme Court had, by dismissing the department's appeals (CAs 3489 -3492 of 2001) on 17.10.2001 as reported in 2002 (139) ELT A -93, affirmed the Tribunal's decision in CCE v. Birla Jute and Industries Ltd., 2001 (135) ELT 280 wherein the Tribunal had allowed MODVAT credit on Welding electrodes under Rule 57A. Referring to the provisions of Rule 57AA, learned counsel argued that the definition of "input" under the rule was wide enough to cover the Welding electrodes and gases used for the repairs and maintenance, of the capital goods used for the manufacture of final product. In this connection, reliance was placed on the Supreme Court's judgments in J.K. Cotton Spinning and Weaving Mills Co Ltd. v. Sales Tax Officer, 1965 (16) STC 563 (SC) and Member, Board of Revenue v. Phelps and Co. (P) Ltd., 1972 (29) STC 101 (SC).

(3.) LEARNED SDR defended the order of the Commissioner by drawing support from the Tribunal's decision relied on by the Commissioner. He also relied on the Tribunal's decision in Hindustan Petroleum Corporation Ltd. v. CCE, 2001 (136) ELT 943 and CCE v. Samtel Colour Ltd., 2001 (135) ELT 288 and argued that the activity of repairing machinery did not amount to 'manufacture' and therefore anything used for such repairs could not be held to have been used 'in or in relation to the manufacture of final product'. The DR also quoted from S.B. Sarkar's Words and Phrases of Central Excise and Customs (2001) Vol. 2 to explain the terms/expressions "repair and maintenance of machinery", "welding" etc. Anything used only for repairing and maintaining the machinery in a factory was not used "in or in relation to the manufacture of final product". The DR claimed support to this contention from the Tribunal's Larger Bench decision in Shri Ramakrishna Steel Industries Ltd. v. CCE, 1996 (82) ELT 575 and Union Carbide (India) Ltd. v. CCE, 1996 (86) ELT 613 as also from the Supreme Court's judgment in J.K. Cotton Spinning and Weaving Mills (vide supra). It was also submitted that the Board's circular was not applicable to the issue under consideration.