Full Judgment
4. Shri D.N. Choudhary, SDR has reiterated the above grounds and urged us to set aside the impugned order and disallow Modvat credit to the respondents in respect of the aforementioned goods for the period of dispute.
5. We have also heard Shri J.S. Sharma, Vice President (Commercial) of the respondent-company. He submitted that the welding electrodes were used for the maintenance of machinery in their factory. He relied on a Trade Notice issued by the Bombay (I) Collectorate of Central Excise, based on CBEC circular No. 31/90 dated 31.5.1990. He submitted that, as per the Circular and Trade Notice, oxygen and acetylene gases used for welding purposes were eligible inputs for Modvat credit and, similarly, welding electrodes should also be held to be eligible for input credit.
In respect of HR Coils, MS Sheets, etc., Shri Sharma submitted that these items were used in the boiler and should be considered to be components of machinery for the purpose of Modvat credit under Rule 57-Q.6. We have examined the submissions. The period of dispute in this case is September 1997 to March, 1998. During this period, Rule 57-Q allowed Modvat credit of the duty paid on such capital goods as specifically mentioned in the Table annexed to Sub-rule (1) of the Rule. Such specification was with reference to Tariff headings. Electrodes were (admittedly) under Heading No. 83.11. Goods falling under this heading were not among the capital goods specified in the said Table.
We, therefore, hold that Modvat credit under Rule 57-Q was not available to welding electrodes during the period of dispute in this case, as rightly contended by the SDR. It is also noteworthy that, as per order dated 10.3.2003 passed by this Tribunal (Larger Bench) in Appeal No. E/1497/2002 reported in 2001 (88) ECC 503 (LB), [Jaypee Rewa Plant v. CCE, Raipur], input credit is also not available to welding electrodes used for maintenance of machinery. The Commissioner (Appeals) relied on the decisions in Wheels India and Jawahar Mills.
But the question of admissibility of capital goods credit on welding electrodes does not appear to have been examined in those cases.
7. Rule 57-Q, relevant for the period of dispute, had come into force on 1.3.97. Before the said date, the setting of the rule was such that the admissibility of Modvat credit of the duty paid on goods, claimed to be capital goods, depended largely on whether or not such goods were used for the manufacture of final products. Since 1.3.97, as already noted, the admissibility of Modvat credit in respect of goods, claimed to be capital goods under Rule 57-Q, was to be determined exclusively with reference to the Tariff classification of the goods. Both the decisions relied on by the Commissioner (Appeals) pertain to the period prior to 1.3.97. The Board's Circular relied on by the respondents is also not applicable as the question before them was neither in relation to Rule 57-Q nor in respect of welding electrodes used for maintenance of machinery as in the instant case.
8. In respect of copper winding wire, the finding of the original authority was that the said item was not an eligible input as it was used in the workshop of the factory for rewinding of damaged/burnt electrical motors/appliances. The finding, in other words, was that copper winding wire was used for repairs and maintenance of motors or appliances. The learned Commissioner (Appeals) has not interfered with this finding. Nevertheless, he has held that the item is eligible for Modvat credit under Rule 57-Q. We note that, as rightly pointed out by the learned SDR, the respondents have never claimed the benefit of capital goods credit in respect of copper winding wire. Their claim has ever been under Rule 57-A for input credit. It has been held by a Larger Bench of this Tribunal in the case of Surya Roshni (supra) that goods which are claimed as inputs cannot get Modvat credit as capital goods. We follow this ruling of the Larger Bench and hold that the benefit of Modvat credit under Rule 57-Q cannot be extended to copper winding wire for the period of dispute.
9. Insofar as the remaining items (MS Sheets, etc) are concerned, the finding of the original authority was as under: "The party's submission with respect of Angles, Joints and Sheet is not tenable, as these are not components made of Angles, Joints and Sheets. In fact, these goods are of general nature and are used for fabrication of steel structure, erection of sheds and worn out parts of machines. These cannot be treated as capital goods, as these goods cannot be used as such in any machine as part, accessory or component to be eligible for Modvat credit under Rule 57-Q" The above finding has not been faulted by the Commissioner (Appeals), who, nonetheless, allowed Modvat credit on the goods by relying on Jawahar Mills (supra). In the case of Jawahar Mills, it was held by the apex Court that the manner of use of the goods was to be ascertained before any goods were adjudged to be capital goods under Rule 57-Q. In the instant case, it appears from the order of the original authority that the subject items were used for fabrication of Steel structures, sheds etc., and hence could not be treated as parts/accessories/components of any machine for the purpose of Modvat credit Rule 57-Q. The company's representative submitted that the items were used as components of boilers. There is no evidence in support of this submission. In the result, we have to uphold the finding of the original authority and disallow Modvat credit to the respondents for the relevant period in respect of MS sheets, etc.
10. The order of the Commissioner (Appeals) is set aside and that of the original authority, in relation to the subject goods, is restored.
The Revenue's appeals are allowed.