Full Judgment
2. The issue involved in this case is that the appellants are manufacturers of sugar in their factory and procured the inputs like Steel plates and dissolved acetylene gas for use in their factory. It is a admitted fact that the steel plates were used for the machinery repairs and the acetylene gas was used in the maintenance of the machinery which were worn out due to usage. The Modvat is sought to be denied to the appellant on the ground that the Steel plates are not inputs and are used for fabrication and are known as construction materials in the common trade parlance and the dissolved acetylene gas is used for the maintenance of the machinery.
3. Heard the submissions made at length by both sides and perused the records. I find from the records that the appellants had taken a stand before both the authorities that the steel plates were used by them to repair the machinery which were producing their final product i.e.
sugar and molasses. This is not disputed. In the case of Mansurpur sugar Mills case the Tribunal in its final order No. A/1561 - 62/05 dated 9.8.2005 and final order No. A/1763/05 dated 29.9.2005 in an identical issue of the credit of Modvat on the steel plates used by the manufacturers of sugar, granted relief to the appellants in that case.
The ratio of the said case is squarely applicable in this case.
Following the said decision I hold that the appellant are eligible to avail the benefit of Modvat credit on the steel plates used by them in their factory in repairs of their machinery.
4. As regards the credit of the duty paid on the dissolved acetylene gas I find that the Larger Bench of the Tribunal in the case of Jaypee Rewa Plant v. CCE, Raipur as reported at has held as under : Cenvat/Modvat - Inputs - Welding electrodes and gases - Used for repairs and maintenance of plant and machinery - Not used co-extensively with the process of manufacture of final products, hence, not integrally connected with the manufacture - Canot be considered to have been used in the manufacture of final products - Note eleigible inputs for credit - Rules 57AA, 57AB and 57AC of erstwhile Central Excise Rules, 1944.
5. The issue of availment of credit on the dissolved acetylene gas is squarely covered by the ratio of the decision of the Larger Bench and hence the appellant are not eligible for the Modvat credit on the duty paid on such inputs. The appeal of the appellant to that extent is rejected.
6. As regards penalty I find that the appellant took credit of the duty paid on inputs based on the decided case laws on the issue and hence no malafide can be attached to their availment of credit. The penalty sought to be imposed on the appellants is unwarranted in this case. The penalty imposed on the appellant is set aside.