Per S.S. Kang:

Heard both sides.

2. In view of conflicting decision on the issue in respect of eligibility of Modvat credit welding electrodes as capital goods, the issue is referred to the Larger Bench.

3. The appellant claimed the benefit of Modvat credit in respect of welding electrodes under Rule 57Q of the Central Excise Rules during the period October to December, 1999.

4. The contention of the appellants is that they are engaged in the manufacture sugar and due to constant use of the machines sometimes they are repaired in the factory. The welding electrodes are used in the repair of the capital goods. As such, they become component of the capital goods. Their contention is that as per the provisions of Rule 57Q, the components, spare and accessories of the specified goods are eligible for credit as capital goods. Their contention is also that the repair of the machines is directly concerned with or pertaining to the manufacture of the finished goods and accordingly, the welding electrodes have been used in or in relation to the manufacture of finished goods as part of the machines. The appellants relied upon the decision of the Tribunal in the case of Philips Carbon Black Ltd. vs. CCE, Bolpur - 2003 (59) RLT 563.

5. The contention of the Revenue is that as per the definition of the Rule 57Q of the Central Excise Rules, 1944 during the period in question, only specified goods used in the factory of manufacture of final products are eligible for Modvat credit as capital goods. The welding electrodes are specified under sub-heading 8311.00 of the Central Excise Tariff. This subheading is not covered under the definition of capital goods as provided under Rule 57Q of the Central Excise Rules. The Revenue also argued that these welding electrodes cannot be held to be components, spares or accessories as specified goods. Revenue relied upon the meaning of component, spares and accessories as provided in the words & phrases by S.B. Sarkar. The contention is that component is part of sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved. The Revenue also relied upon the Larger Bench decision of the Tribunal in Jaypee Rewa Plant vs. CCE, Raipur-2000 (38) RLT 1111 (CEGAT-LB)=RLT (L.B.-CEGAT)- 1744=2003 (88) ECC 503 whereby it was held that welding electrodes are not entitled for Modvat credit as inputs. These are only used for the repair purposes.

6. The claim of the appellant is that welding electrodes are covered under the definition of. capital goods as provided under Rule 57Q of the Central Excise Rules."During the relevant period, the provisions of Rule 57Q of Central Excise Rules is reproduced below:

Rule 57Q. Applicability.- (1) The provisions of this section shall apply to goods (hereafter in this section, referred to as the "final products") described in column (3) of the Table given below and to the goods (hereafter, in this section, referred to as "capital goods"), described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final products.

TABLE