Welding Electrodes Used For Repairing Plant & Machinery Are Capital Goods: Rajasthan High Court Allows CENVAT Credit To Hindustan Zinc

The Rajasthan High Court has granted CENVAT Credit to Hindustan Zinc and held that welding electrodes used for repairing plants and machinery are capital goods and inputs.

The bench of Justice Vijay Bishnoi and Justice Yogendra Kumar Purohit has relied on the decision of the Supreme Court in the case of Jawahar Mills Ltd. vs. CCE, in which it was held that Welding Electrodes are eligible inputs for availing of CENVAT Credits and can also be considered capital goods since they are used for repair and maintenance of machinery that qualifies for input credits.

The appellant/assessee, Hindustan Zinc, challenged the order of the Tribunal. The issue raised was whether the tribunal was correct in holding that Welding Electrodes used for repair and maintenance of plant and machinery as well as other welding work in the building area are eligible for CENVAT Credit when, in fact, the welding electrodes are not capital goods as defined under Rule 2 (b) of the erstwhile Cenvat Credit Rules, 2002, now Rule 2 (a) of the Cenvat Credit Rules, 2004.

The appellant contended that the respondent, the department, has already granted benefits to the appellants for various time periods while holding that the welding electrodes used for repairing and maintaining plant and machinery are eligible for CENVAT credit both as capital goods as well as inputs.

The department contended that certain SLPs filed on behalf of the department before the Supreme Court against the judgements of different High Courts are still pending. Therefore, it would be appropriate to wait for the decision of the Hon’ble Supreme Court on the points involved in these appeals.

The court, while explaining the expression "in the manufacture of goods" stated that it should normally encompass the entire process carried on by the dealer, of converting raw materials into finished goods, where any particular process or activity is so integrally connected with the ultimate production of the goods, but for that process, manufacturing or processing of the goods would be commercially inexpedient, and goods required in that process would fall within the expression "in the manufacturing of goods".

The court, while allowing the appeal, held that capital goods can be machines, machinery, plant equipment, apparatus, tools, or appliances. Any of these goods, if used for producing, processing, or bringing about any change in any substance for the manufacture of the final product, would be 'capital goods'.

Case Title: Hindustan Zinc Ltd. Versus C.C.E.

Citation: 2023 LiveLaw (Raj) 68

Case No.: D.B. Central/excise Appeal No. 4/2010

Date: 11/07/2023

Counsel For Appellant: Sharad Kothari

Counsel For Respondent: Kuldeep Vaishnav

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