Case Law Details
Manikgarh Cement Vs Commissioner of Central Excise (CESTAT Mumbai)
The question that arises is whether ‘welding electrodes’ are ‘consumables’ as held by the original authority or are used in the manufacture of excisable goods and, therefore, eligible for MODVAT credit as claimed by the assessee.
It is the claim of the appellant that within ‘capital goods’, which are eligible for availment of MODVAT credit, ‘welding electrodes’ are also found.
Hon’ble High Court of Bombay in ACC Limited v. Commissioner of Central Excise, Pune – II [2018 (361) ELT 433 (Bom.)] held that There is no doubt that ‘welding electrodes’ deplete by usage but with the material in the electrodes transferred to the ‘liner’ and the restoration renders it fit for continued production of cement.
MODVAT credit is available on procurement of goods that are ‘inputs’ with ‘capital goods’ being entitled to the extent of conformity with Explanation of that expression in rule 57Q of Central Excise Rules, 1944. Doubtlessly, there is no mention of ‘consumables’ in the said Explanation but neither is it certain that that ‘consumables’ has little to do with manufacturing process for depriving eligibility for MODVAT credit. It is not anybody’s case that ‘consumables’ cease to exist over period of usage; it is merely that replenishment is required owing to the nature of the product. The common understanding of ‘consumables’ is that of depletion without transfer to the goods deployed for manufacture but there are a few, such as ‘welding electrodes’, which, upon such consumption, enhances the capital goods which are, undoubtedly, eligible for credit. Absence of ‘welding electrodes’ for deployment on ‘liners’, which are ‘capital goods’, impedes production and, therefore, its use is essential for production.
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