M/S. Eid Parry India Ltd vs Ccce, Ltu, Chennai

(Arising out of Order-in-Appeal No. 19/2011 dated 31.3.2011 passed by the Commissioner (Appeals), Central Excise & Service Tax, LTU, Chennai)

M/s. EID Parry India Ltd. Appellant

Vs.

CCCE, LTU, Chennai Respondent

Appearance

Shri S. Muthuvenkataraman, Advocate, for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent

CORAM

Honble Shri P.K. Choudhary, Judicial Member

Date of Hearing / Decision: 15.07.2015

Final Order No. 40780 / 2015

The appellants are engaged in the manufacture of sugar, molasses and denatured ethyl alcohol and are clearing the said goods on payment of duty and are also availing CENVAT credit on inputs. The appellants have availed CENVAT credit for the period October 2006 to December 2008 on oxygen and acetylene gases as input credit and on welding electrodes as capital goods. The adjudicating authority has held that oxygen and acetylene gases do not form part of the manufacturing process in the conversion of raw material of sugarcane to finished goods sugar. They are not directly or indirectly used in the manufacture of sugar and thus cannot be considered as inputs. He has relied on the decision of the Tribunal in the case of J.K. Cement Works Vs. CCE, Jaipur  2010 (252) ELT 249 (Tri.  Del.) wherein it has been held that oxygen and acetylene gases used for maintenance and repair of plant and machinery are not covered by definition of inputs. In the same case, CENVAT credit taken on welding electrodes has been held as eligible capital goods.

2. The learned counsel for the appellant stated that oxygen and acetylene gases are used for repair and maintenance of machineries which are used in the manufacture of final product and hence are eligible inputs and are covered by Explanation II to Rule 2K of CENVAT Credit Rules, 2002. He has relied on the following decisions:-

(a) L.H. Sugar Factory Ltd. Vs. CCE, Meerut  2011 (272) ELT 275 (Tri.  Del.)

(b) CCE, Bangalore Vs. Alfred Herbert (India) Ltd.  2010 (257) ELT 29 (Kar.)

(c) CCE, Coimbatore Vs. Madras Aluminium Company Ltd.  2008 (226) ELT 342 (Mad.)

He further submits that Rule 2K of CENVAT Credit Rules, 2004 refers:-

(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 steam 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 services.

3. The learned AR for Revenue submitted that regarding Rule 2K of CENVAT Credit Rules, 2004, the interpretation of the statute is used in or in relation to the manufacture of final product or for any other purpose refers for generation of electricity or steam only. He also reiterated the findings of the Commissioner (Appeals) and stated that oxygen and acetylene gases are in no way integrally connected to the manufacture of the final product. Further, as per Rule 6 of Central Excise Rules, 2002, the onus lies on the assessee to determine the admissibility of the credit. He also relied on the decision of the Tribunal in the case of J.K. Cement Works (supra) wherein it has been held that oxygen, acetylene gases and helium gases used for repair and maintenance of plant and machinery is not covered by the definition of inputs and hence credit is not available under Rule 2K of CENVAT Credit Rules, 2004.

4. After hearing both sides and on perusal of the records and the decisions cited, I find that the Honble Madras High Court in the case of CCE, Coimbatore Vs. Madras Aluminium Company Ltd. (supra) has held as under:-

6. In respect of oxygen gas, acetylene gas, electrodes, welding wire and pig iron, the Tribunal held that Modvat credit were to be allowed following the judgment of the Tribunal in 1993 (67) E.L.T. 364. The issue has been covered in favour of the assessee by the decision of the Apex Court in the case of C.C.E., Coimbatore v. Jawahar Mills Ltd., 2001 (132) E.L.T. 3 in which the earlier decision of the Supreme Court in the case of Indian Farmers Fertiliser Co-operative Ltd. v. C.C.E., Ahmedabad, AIR 1996 SC 2542, has been taken note of. Incidentally with regard to all these issues, the department has contended that the case of Jawahar Mills Ltd. - 1999 (108) E.L.T. 47 held in favour of the assessee has been taken on appeal by the department to the Supreme Court and the same is pending. Now the Supreme Court in 2001 (132) E.L.T. 3 decided the issue in favour of the assessee. In the above decision, the Honble High Court has also referred to the decision of the Honble Supreme Court in the case of CCE Vs. Jawahar Mills Ltd.  2001 (132) ELT 3 (SC). In view of the decision of the Honble Apex Court as relied by the Honble High Court of Madras and following the judicial discipline, I am bound to follow the decision delivered by the Honble High Court of Madras.

5. In view of the discussions above, the appellant-assessee is entitled to avail CENVAT credit on oxygen and acetylene gases which are being used in repair and maintenance of plant and machinery as inputs. Accordingly, the appeal of the assessee is allowed.

(Dictated and pronounced in open court)

(P.K. Choudhary) Judicial Member

Rex

4