Cenvat Credit available on Welding Electrodes and D.A Gas: CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal, (CESTAT), West Zonal Bench, Mumbai, has recently, in an appeal filed before it, held that cenvat credit is available on welding electrodes and D.A gas.

The aforesaid observation was made by the Tribunal when an appeal was preferred before it by the appellant, M/s Manikgarh Cement, a manufacturer of cement and clinker, having Central Excise registration, as against the denial of the CENVAT Credit of Rs.10,28,852/- on welding electrodes and dissolved acetylene gas (D.A. gas),as inputs in the cement manufacturing process, for the period from April, 2013 to June, 2017.

The ground of the appeal being the assessee appellant’s availability of the CENVAT credit,followed by the Commissioner (Appeal’s) recovery confirmation of the aforesaid credit amount along with interest and penalties, the department’s claim was that the said credit was denied byit on the ground that those cannot be treated as inputs, they lacking any relationship with the manufacture of final product i.e., cement and clinker.

With the appellant challenging the legality of the said order on the grounds that both welding electrodes and D.A. gas qualify as inputs within the amended definition of Rule 2(k)(i) of the CENVAT Credit Rules, 2004 amended w.e.f. 01.04.2011,and that they alternatively qualify as capital goods alsounder Clause (iii) of 2(a) of the said Rules for the purpose of availingCENVAT Credit onthe duty paid on them,the Tribunal observed as follows:

“As could be noticed from para 24 of the Order-in-Original, the adjudicating authority had observed that welding electrodes and D.A. gas were used in the cement manufacturing plant of the appellant for the purpose of repair and maintenance of its plant and machinery. This being the observation of the adjudicating authority, there is no denial of the fact that the plant and machinery which were being used for manufacturing of final product, were being kept usable with conditional periodic repair and maintenance, in which these two components were being used.”

“Hence, both welding electrodes and D.A. gas are required for smooth process of manufacturing, for which definition of input provided under Rule 2(k)(i) is squarelyapplicable,as the clarificatory circular of the board issued on 29.04.2011 clearly mentions that goods used in relation to manufacture of final product in indirect way also excludes the definition contained in the said Rule 2(k)(F) that deals with goods having no relationship with manufacture of final product”, the bench added.

Thus, pointing out at the inaccuracy of the department’s claim while allowing the appellant’s appeal, Dr. Suvendu Kumar Pati, the judicial member of the bench concluded:

“Relied upon case laws namely, Sree Rayalaseema Hi-strength Hypo Ltd. decision, pronounced on November 16, 2011, as was relied upon in the Order-in-Appeal, was pronounced with reference to pre-amended CENVAT Credit Rules which cannot be applied as a judicial precedent to the post amended definition that has broadened the meaning to have high amplitude. I am, therefore, of the considered view that the credits availed by the Appellant on welding electrodes and D.A. gas are eligible credits and that the appellant had rightly availed the same.

Thus, the appeal is allowed and the order passed by the Commissioner of Customs, Central Excise & GST (Appeals), Nagpur vide Order-in-Appeal No. NGP/EXCUS/000/APPL/043/19-20/1184 dated 20.06.2019, to the extent of denial of CENVAT credits of Rs.10,28,852/- is hereby modified with a finding that those are eligible credits and rightly availed by the Appellant manufacturer.”

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