M/s. Jai Balaji Industries Limited (Unit-IV) vs Commissioner Of CGST And CX, Bolpur Commissionerate

The present appeal has been filed by the assessee, M/s. Jai Balaji Industries Limited, against Order-in-Appeal dated 27.04.2018 passed by the

learned Commissioner (Appeals), Siliguri, whereby the appeal filed by the assessee has been rejected. The said appeal was filed by the assessee

against Order-in-Original dated 14.03.2017 passed by the Asst. Commissioner, Durgapur.

Briefly stated, the facts of the case are that the appellant is engaged in manufacture of various iron and steel products on which central excise duty

is being paid. The appellant is availing Cenvat Credit on various inputs as per the provisions of CENVAT Credit Rules, 2004. The present dispute

pertains to disallowance of credit availed by the appellant on welding electrodes as ‘input’. Two separate Show Cause Notices were issued by

the original authority for the period from April 2010 to December 2012 and from January 2013 to October 2013 to deny credit on welding electrodes.

Both the said notices were adjudicated by a common adjudication order and the credit was disallowed on the ground that input used in repair and

maintenance in the factory is not eligible for credit, as proposed in the notices.

In the first appeal, the learned Commissioner (Appeals) while taking note of the amendment made in the definition of ‘input’ w.e.f. 01.03.2011

under Rule 2(k) of the Credit Rules, allowed credit for the period post March 2011 whereas, disallowed credit for the period April 2010 to February

2011. It is the contention of the Ld. Commissioner that definition was amended from the aforesaid date to enlarge the scope of term ‘input’ and

therefore, the appellant is eligible to avail credit on welding electrode only during the period covered post amendment.

For the period prior to the said amendment, the Commissioner observed that repair and maintenance activities cannot be said to be in “relation to

manufacture†and therefore, any goods used for said repair and maintenance will not qualify as ‘input’ for the purpose of availing credit. He

relied on the decision of the Tribunal in the case of Steel Authority of India Limited vs. CCE 2008 (222) ELT 233 (Tri-Kol) against which SLP has

been dismissed by the Supreme Court as reported in 2008 (229) ELT A127 (SC).

Heard Shri S Mohapatra, learned General Manager (Taxation), appearing for the appellant and Shri Joydip Chattopadhyay, learned Authorized

Representative for the Department through video conferencing and perused the appeal records.

I find that the issue stands decided in favour of the appellant as held by the Tribunal in the case of CCE, Meerut vs. Baja Hindustan Ltd 2017 (49)

STR 601 (Tri-Del) where the issue pertaining to eligibility of welding electrode for repair and maintenance activity during the year 2008 (i.e. prior to

amendment from 1st March, 2011) has been examined. The Tribunal while taking note of the decision in the case of Steel Authority (Supra) took a

view in favour of the assessee considering the decision of three High Courts wherein it has been held that credit is eligible on welding electrodes. It

has also been observed therein that mere dismissal of SLP by the Supreme Court against the decision rendered by the Tribunal will not be considered

to be law since not decided by the Apex Court. The relevant portion of the decision of the Tribunal is as below:-

“6. I have considered the submissions from both the sides and perused the records.

On the issue of eligibility of welding electrodes for Cenvat credit, there are judgments of three High Courts - judgments of Hon’ble

Chhattisgarh High Court, Hon’ble Karnataka High Court and Hon’ble Rajasthan High Court in the cases mentioned above. The

Hon’ble Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. (supra) has also discussed the judgment of the Tribunal

in the case of Steel Authority of India Ltd. (supra) taking a contrary view and has held that dismissal by the Apex Court of SAIL’s SLP

against Tribunal’s judgment, being dismissal without giving any reasons, does not laid down any law. Though Hon’ble Andhra

Pradesh High Court in the case of Sree Rayalaseema Hi-Strength Hypo Ltd. (supra) has taken a contrary view, I am of the view that when

three High Courts have taken a view that welding electrodes used for repair and maintenance of the plant and machinery are eligible for

Cenvat credit, it is this view that would prevail. Moreover, the question of eligibility of an item used for a particular activity for Cenvat credit

is linked with whether the activity in which the items are used has nexus with the manufacture or not and it is not material as to whether that

activity is part of manufacture or not. In view of this, the impugned order upholding the Cenvat credit demand is not sustainable and there is

no merit in the Revenue’s appeal for imposition of penalty. Therefore, the impugned order upholding the Cenvat credit demand is set

aside. The appeal filed by the appellant is allowed and the appeal filed by the Revenue is dismissed.â€​

Since the issue is no longer res integra and the eligibility of Cenvat Credit on welding electrode has been squarely decided in favour of the assesse

even for the period prior to 1st March, 2011, there is no reason to disallow credit in the present case. The demand of excise duty, interest and penalty

is thus set aside. The appeal is allowed with consequential relief, if any.

(Order pronounced in the open court on 16 June 2021.)