2017 (9) TMI 1893 - HC - Central Excise

CENVAT Credit - capital goods - plant, structures, embedded to earth - angles, joists, beam, channels, bars, flats which go into fabrication of such structures - HELD THAT - Section 37 of the Central Excise Act, 1944; for short, 'the Act', is a rule making power. Section 37(2)(xvia) provide for the credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods. Section 37 (2A) of the Act The power to make rules conferred by clause (xvi) of sub-section (2) shall include the power to give retrospective effect to rebate of duties on inputs used in the export goods from a date not earlier than the changes in the rates of duty on such inputs. Though the power to make rules include the power to give retrospective effect, while doing so the provision under consideration is neither made retrospective nor could it be treated as one. The questions formulated in these appeals in favour of the Assessees and against the Revenue.

Summary

Issues:
1. Interpretation of the term "capital goods" in the context of excise duty credit.
2. Treatment of goods like cement and steel items used for structures as inputs for capital goods.
3. Retrospective application of the CENVAT Credit Rules amendment.

Analysis:
1. The Tribunal referred several issues for consideration to the Larger Bench, including whether the term "capital goods" can include structures embedded to earth. The Tribunal held that the definition of "capital goods" in the CENVAT Credit Rules must be in the context of providing credit of duty paid on excisable goods. The Tribunal emphasized that the determination of whether a plant or structure embedded to earth can be considered excisable goods should be based on relevant legal precedents.

2. The Tribunal also addressed whether goods like cement and steel items used for laying foundation and building supporting structures can be treated as inputs for capital goods. The Tribunal concluded that such goods cannot be considered as inputs for capital goods or in relation to the final products, thereby disallowing the credit of duty paid on them under the CENVAT Credit Rules.

3. The High Court considered the retrospective application of the CENVAT Credit Rules amendment. Previous judgments by other High Courts were cited, emphasizing that the amendment made in the Rules cannot be treated as clarificatory and should operate only prospectively. The High Court concurred with these views and rejected the notion of retrospective application of the amendment.

In conclusion, the High Court ruled in favor of the Assessees and against the Revenue, setting aside the Tribunal's decision in each appeal. The Assessees' appeals were allowed, while the Revenue's appeals were dismissed, with no order as to costs. The High Court's decision was based on a thorough analysis of the issues surrounding the interpretation of "capital goods," treatment of certain goods as inputs, and the retrospective application of the CENVAT Credit Rules amendment.