Cenvat Credit Allowable To Nayara Energy On Inputs Used For Railway Lines: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that cenvat credit is allowable on inputs used for railway lines.

The bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that railway tracks are used to move inputs, raw materials, and manufactured goods within factory premises. Railway Track cannot be kept out of consideration for availing Cenvat credit as it is being used directly for manufacture. Even though the Railway line is outside the factory, it is exclusively used for the handling of material used in the manufacture of final products in the appellant's factory.

The Commissioner denied the Cenvat credit on the welding Electrodes, Wire FLR, Filler Wires, Welding wire, and Wire Rope. The Cenvat credit was denied on the ground that the appellant’s use of the goods for repair and maintenance of plant and machinery cannot be considered to have been used ‘in or in relation to the manufacture of final products’ as they are not used co-extensively with the process of manufacture of petroleum products and hence not integrally connected with the manufacture. Therefore, credit is not available to the appellant.

The Commissioner has also denied the Cenvat credit on M.S. Gratings and G.I. Coated Gratings on the ground that the said goods used by the Appellant cannot be classified as components, spares, or Accessories of the Plant and machinery used in the manufacture of final products.

The Commissioner denied the Cenvat credit on the material used in the laying of Rail Lines on the ground that such a rail line was situated outside the factory premises; therefore, credit cannot be extended.

The appellant contended that its unit is an integrated, huge petroleum plant engaged in the manufacture of Motor spits, high-speed diesel, furnace oil, pet coke, superior kerosene, LPG, etc. Welding Electrodes, Filler wires, and Wire Fillers were used for the repair and maintenance of the plant and machinery. Repair and maintenance activities are essential for smooth manufacturing operations, without which manufacturing activity is not commercially feasible. A welding machine is classifiable under heading 84.68 of the Central Excise Tariff and covered by Rule 2(a)(A)(i), and since welding electrodes are part of the welding machine, the same would be covered by Rule 2(a)(iii) of the Cenvat Credit Rules, 2004.

The CESTAT, while allowing the appeal, held that the appellant is entitled to the Cenvat credit on the goods.

Case Title: Nayara Energy Limited Versus Commissioner of Central Excise & ST, Ahmedabad-i

Case No.: EXCISE Appeal No. 11509 of 2013-DB

Date: 11.08.2023

Counsel For Appellant: Ramnath Prabhu

Counsel For Respondent: Kalpesh P Shah

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