2016 (12) TMI 1377 - AT - Central Excise

CENVAT credit - structural items such as M.S. structures, Plate, Flat, Angles, Channels, Bars and beam etc - penalty - denail of credit placing reliance in the case of Vandana Global Ltd Vs Commissioner of C.Ex. Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) , where Hon ble Larger Bench has taken a view that even prior to 7/7/2009 when the explanation 2 of Rule 2(k) was inserted in the Cenvat credit Rules, 2004, it is clarificatory nature and had retrospective effect. As per the said amendment structural steel was explicitly excluded from the definition of input. Held that - much water has been flown on the issue as various High courts have either distinguished or overruled, the view taken by the Hon ble Larger Bench in case of Vandana Global Ltd hence it is no more good law - reliance placed in the decision of the case of Chemplast Sanmar Ltd 2014 (9) TMI 535 - MADRAS HIGH COURT , where it was held that Cenvat credit is admissible on the structural steel, therefore Larger Bench decision in case of Vandana Global Ltd clearly stands distinguished, the entire foundation of the impugned order gets demolished - Cenvat credit is admissible on structural steel in light of the above referred judgments - the limitation aspect ignored - since credit allowed, penalty set aside. Credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues Involved:
1. Admissibility of Cenvat credit on structural steel.
2. Invocation of the extended period of demand.
3. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Structural Steel:
The core issue revolved around whether the structural items such as M.S. structures, Plate, Flat, Angles, Channels, Bars, and beams used by the assessee for supporting various plant and machinery could be considered as capital goods and thus eligible for Cenvat credit. The Adjudicating Authority had disallowed the Cenvat credit, relying on the Larger Bench decision in Vandana Global Ltd Vs Commissioner of C.Ex. Raipur, which held that Cenvat credit is not admissible on structural steel. However, the assessee argued that subsequent decisions by various High Courts had overruled or distinguished the Vandana Global Ltd case, thereby making it not good law. The Tribunal agreed with the assessee, noting that judgments such as those in India Cements Ltd Vs. CESTAT, Chennai, Commissioner of Central Excise, Salem Vs. Chemplast Sanmar Ltd, and The Customs Excise and Gold (Control) appellate Tribunal, and M/s. Lloyds Steel Industries had consistently held that Cenvat credit on structural steel is admissible. Furthermore, the Tribunal referenced the Gujarat High Court decision in Mundra Ports & Special Economic Zone Ltd vs. CCE, & Cus, which clarified that the amendment effective from 7/7/2009 was not clarificatory in nature and thus did not have retrospective effect. Consequently, the Tribunal concluded that Cenvat credit on structural steel was admissible for the period prior to 7/7/2009, which included the period in question (June 2004 to November 2008).

2. Invocation of the Extended Period of Demand:
The assessee contended that the demand for the period June 2004 to November 2008 was time-barred as the show cause notice was issued on 18/6/2009, invoking the extended period of demand. The assessee argued that the issue was highly debatable and involved interpretation of law, with various contrary decisions leading to the matter being referred to a larger bench. Additionally, the assessee had been submitting Cenvat registers along with monthly returns to the jurisdictional departmental officers, which should preclude the invocation of the extended period. The Tribunal did not delve deeply into the limitation aspect, as it had already decided in favor of the assessee on the merits of the case regarding the admissibility of Cenvat credit.

3. Imposition of Penalty:
The Revenue's appeal focused on the Commissioner (Appeals) dropping the penalty imposed by the Adjudicating Authority. The Revenue argued that since the demand had been confirmed for a longer period, the Commissioner (Appeals) had no power to waive the penalty, citing the Supreme Court judgment in Union of India Vs. Dharamendra Textile Processors. However, the Tribunal, having allowed the Cenvat credit on structural steel, concluded that there was no question of penalty. Consequently, the appeal filed by the Revenue was dismissed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that Cenvat credit on structural steel is admissible for the period prior to 7/7/2009. The impugned order was modified accordingly, and the appeal filed by the Revenue was dismissed. The Tribunal's decision was based on the consistent view of various High Courts that Cenvat credit on structural steel is admissible, thereby distinguishing the Larger Bench decision in Vandana Global Ltd.