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Judgment
Sanjay Kumar, J.—An appeal by the assessee u/s 35G of the Central Excise Act, 1944 calling in question the order dated 7-9-2010 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, (for brevity, ''the Tribunal'') in Appeal No. Excise/547/2009. By the said order, the Tribunal dismissed the assesses appeal and confirmed the Order-in-Appeal dated 2-3-2009 of the Commissioner, Central Excise and Customs (Appeals), Guntur, whereby the Commissioner had allowed the Revenue''s appeal and reversed the Order-in-Original dated 24-11-2008 of the Assistant Commissioner of Customs, Central Excise and Service Tax, Kurnool Division. The assessee is a company involved in the manufacture of sulphuric acid, bleaching powder, calcium hypochlorite and mono-chloro acetic acid. The goods manufactured by the assessee fall within the ambit of the Central Excise Tariff Act, 1985 and it avails CENVAT credit facility on various inputs, capital goods and services. The issue presently pertains to the entitlement of the assessee to claim CENVAT credit on welding electrodes used for repairs and maintenance of its plant and machinery during the period 1-6-2003 to 31-3-2008. The assessee availed credit to the tune of Rs. 3,59,792/- in this regard. The Assistant Commissioner of Customs, Central Excise and Service Tax, Kurnool Division, issued Show Cause Notice dated 1-7-2008 calling upon the assessee to explain as to why this credit should not be recovered along with interest and penalty. The show cause notice was issued on the ground that ''welding electrodes'' did not qualify as inputs as they were neither used for manufacture of the final product nor manufacture of capital goods. The assessee submitted its reply dated 26-8-2008 claiming that welding electrodes could be treated as inputs in relation to the manufacture of the final product as they used for carrying out the repair/maintenance of equipment in its production factory and were hence required for maintaining the plant in running condition; that as the equipment constituted capital goods, welding electrodes used in relation to manufacture/maintenance and replacement of such capital goods would fall within the definition of input in the CENVAT Credit Rules, 2004 (for brevity, the Rules of 2004). Accepting the stand taken by the assessee, the Assistant Commissioner, Central Excise and Service Tax, Kurnool Division, dropped further proceedings vide Order-in-Original dated 24-11-2008. In appeal by the Revenue, the Commissioner, Central Excise and Customs, Guntur, took a different view. Relying upon the decision of the Customs, Excise and Service Tax Appellate Tribunal, Kolkata, in SAIL v. Commissioner of Central Excise, Ranchi 2008 (222) E.L.T. 233 (Tri.), he held that the assesses was not entitled to avail credit on the duty paid on welding electrodes. He distinguished the decision of the Rajasthan High Court in M/s. Hindustan Zinc Ltd. v. Union of India 2008 (228) E.L.T. 517 on the ground that it did not pertain to welding electrodes. In the result, the Commissioner held that the assessee was liable to refund the credit availed and pay interest in case the credit was used towards payment of duty. The penalty proposed under the Show Cause Notice dated 1-7-2008 was however dropped.
Aggrieved, the assessee appealed to the Tribunal u/s 35B of the Act of 1944. By order dated 7-9-2010, the Tribunal confirmed the Commissioner''s order. Sri K. Vijay Kumar, learned counsel for the assessee, would contend that the issue of CENVAT credit on welding electrodes is yet to be considered by a larger bench of the Supreme Court in view of the reference made in Ramala Sahkari Chini Mills Ltd., U.P. Vs. Commissioner Central Excise, Meerut-I, and that the matter therefore requires to be admitted.
It is however pertinent to note that the reference made in Ramala Sahkari Chini Mills Ltd. was in the context of the view taken therein that the inclusive definition of ''input'' in Rule 2(g) of the CENVAT Credit Rules, 2002 (for brevity, ''the Rules of 2002'') corresponding to Rule 2(k) of the Rules of 2004, could not be restricted to the categories mentioned therein as held in Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III, The issue as to whether welding electrodes would constitute inputs was not the basis for the reference.
Rule 2(k) of the Rules of 2004 defines ''input'' as hereunder :
(k) ''input'' means -
(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or stem used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.
Explanation-1. The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation-2. Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;
Dealing with the corresponding definition of ''input'' in Rule 2(g) of the Rules of 2002, the Supreme Court in M/s. Maruti Suzuki Ltd. held that the crucial requirement is that the goods must be used in or in relation to the manufacture of the final product to qualify as an input and that this presupposes that the element of manufacture must be present. The second explanation to the definition in Rule 2(k) makes it clear that only goods used in manufacture of capital goods which are further used in the factory of the manufacturer would qualify as input. Though the assessee used the terms ''manufacture'', ''repair'' and ''maintenance'' interchangeably in its reply, it is manifest that manufacture and repair/maintenance are not the same and cannot be equated. Goods used for repair or maintenance of the machinery are not constituents in its actual manufacture and therefore would not qualify under the second explanation to the definition.
The decision of the Bench of the Tribunal at Kolkata in SAIL proceeded on this premise and followed the decision of the Larger Bench of the Tribunal in 2003 (88) ECC 503 wherein it was held that welding electrodes used for repair and maintenance of plant and machinery cannot be said to be used coextensively in the process of manufacture of the final product and hence, they are not integrally connected with the manufacture. Pertinent to note, the decision of the Kolkata Bench of the Tribunal was affirmed by the Supreme Court in.
In that view of the matter, we are not inclined to agree with the submission of the learned counsel for the assessee. The second explanation to the definition of ''input'' under Rule 2(k) of the Rules of 2004 puts it beyond doubt that unless the goods are used in the manufacture of capital goods, which are thereafter used in the factory, they do not qualify as inputs. Repair and maintenance being distinct from manufacture, CENVAT credit cannot be claimed under Rule 2(k) of the Rules of 2004 on the duty paid on welding electrodes used for repairs.
The contention of the learned counsel for the assessee that the extended period of limitation of five years for recovery of the duty under the proviso to Section 11A(1) of the Central Excise Act, 1944 would not be available to the Revenue in this case, as the penalty proposed to be levied was dropped, does not hold water. The extended period of five years for recovery of duties either levied or short-levied arises under various situations such as fraud, collusion, willful mis-statement, suppression of facts or contravention of the provisions of the Act or the Rules made thereunder with intention to evade payment of duty. It is no doubt true that the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, . But merely because the ingredients for both are the same, it would not mean that in case penalty is not imposed, the duty also cannot be recovered. Once the assessee availed credit under Rule 2(k) of the Rules of 2004 without entitlement it amounts to contravention of the rule with the intention of evading payment and the extended period of limitation would be available to the Revenue, notwithstanding the decision not to purpose penalty upon the assessee.
On the above analysis, we are of the considered opinion that no substantial question of law arises in this appeal warranting its further consideration. The Appeal is accordingly dismissed at the stage of admission but in the circumstances, without any order as to costs.