Order date – 21 October 2022

 Facts –

• The appellant, Manikgarh Cement availed MODVAT credit, under rule 57Q of Central Excise Rules, 1944, of duty of ₹ 15,97,047/- charged on procurement of ‘welding electrode’ by them.
• The Revenue denied the credit after having examined the process of manufacture in detail, it is found that the ‘welding electrodes’ are not ‘capital goods’.

Issue – 

• Whether ‘welding electrodes’ are ‘consumables’ or are used in the manufacture of excisable goods and, therefore, eligible for MODVAT credit rule 57Q of Central Excise Rules, 1994?

Order – 

• The Tribunal observed 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. Also as per the explanation in Rule 57Q welding electrode are also classified under capital goods which are eligible for MODVAT credit.
• 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.
• The characteristics of ‘consumables’ does not attach to ‘welding electrodes’, and, therefore, the consequential recovery of MODVAT credit in the impugned order is incorrect.
•  Accordingly, appeal is allowed