The Gujarat High Court recently held that cenvat credit is allowable on welding electrodes, welding wire, used for laying rail lines outside the factory.
It is the case of the Revenue that whether the respondent assessee is entitled for Cenvat credit on inputs i.e. welding electrodes, wire FLR, filler Wires, Welding wires, Wire rope, material used for railway line and capital goods i.e. M.S.Gratings/ G.I.Coated Gratings or not.
The Commissioner of CENVAT denied the CENVAT credit on above items on the ground that the use of such goods for repair and maintenance of plant and machinery by the respondent assessee cannot be considered to have been used “in or in relation to the manufacture of final products”, as they are not used co-extensively in the process of manufacturing of the petroleum products by the respondent assessee.
Being aggrieved the respondent assessee preferred the appeal before the CESTAT and allowed the appeal.
The counsel for the appellant submitted that the Adjudicating Authority after analysing the definition of input as provided in Rule 2(k) of the CENVAT Credit Rules 2004 upto 31.03.2011 and the Rule 2(k) of the CENVAT Credit Rules which were amended with effect from 01.04.2011 vide notification no.3 of 2011 held that the respondent assessee has not utilized the inputs of the goods mentioned herein above for the purpose of manufacture of the final product.
With regard to the Cenvat Credit M/S.Gratings it was submitted that the Adjudicating Authority has applied the “user test” and in the facts of the case, it was held that such Ms.Gratings can not be considered as part of the capital goods installed in the factory premises of the respondent and therefore the same would not fall within the ambit of the capital goods as contemplated in Rule 2(a)(A) of the Cenvat Credit Rules, 2004.
The counsel for the respondent submitted that the Tribunal has not committed any error in arriving at the findings that the respondent is entitled to the Cenvat credit on the items like Welding Electrodes, Welding filler Wires as capital goods as per Rule 2(k) of the CENVAT Credit Rules, 2004.
A Division Bench of Justices Bhargav D Karia and Niral R Mehta observed that “M.S.Gratings were used as accessory for supporting and holding for approaching how to plant and processing units of refinery and platforms for approaching or reaching out the plant is part and parcel of the entire plant and machinery particularly in large scale manufacturing unit, without which the operation of the plant is not possible. It was therefore held by the Tribunal that, therefore the M.S.Gratings used as accessory in such structure is used in relation to the manufacture of final product.”
“In view of such finding of fact arrived at by the Tribunal, We are of the opinion that the Tribunal has not committed any error in following a Coordinate Bench’s decision in the case of the respondent assessee itself” the Court noted.
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