2018 (7) TMI 704 - AT - Service Tax

CENVAT Credit - retrospective applicability of the amendment to Rule 2(k) of CCR, 2004 - goods used in the construction of factory shed and in laying down the foundation of various capital goods - Held that - Amendment to Rule 2(k) vide Notification No. 16/2009 dated 7.7.2009 is only prospective and same cannot be made retrospective as held by various High Courts as well as by this Tribunal in various judgments - reliance placed in the case of Mundra Ports & Special Economic Zone Ltd. vs. CCE & Cus 2015 (5) TMI 663 - GUJARAT HIGH COURT - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of Cenvat Credit Rules, 2004 regarding availing credit for construction materials.
2. Retrospective applicability of Rule 2(k) amendment.
3. Validity of Cenvat Credit availed by the assessee.
4. Application of penal provisions under Rule 15 of Cenvat Credit Rules, 2004.

Interpretation of Cenvat Credit Rules, 2004 regarding availing credit for construction materials:
The respondent-assessee, registered under Service Tax, included the value of free supply materials in the assessable value for Service Tax computation. The department contended that the assessee wrongly availed Cenvat Credit for construction materials, which were used for factory construction. The dispute centered on whether Rule 2(k) of Cenvat Credit Rules allowed such credit.

Retrospective applicability of Rule 2(k) amendment:
The Commissioner's order allowed Cenvat Credit taken by the assessee for materials used before the amendment to Rule 2(k) came into effect on 7.7.2009. The department argued that the amendment was clarificatory and retrospective, citing precedents. The Tribunal noted conflicting views on the retrospective nature of the amendment.

Validity of Cenvat Credit availed by the assessee:
The department challenged the Commissioner's decision to allow Cenvat Credit taken by the assessee before the Rule 2(k) amendment. The Tribunal considered various judgments, including a High Court ruling, supporting the prospective application of the amendment. The Tribunal dismissed the appeal, upholding the Commissioner's decision.

Application of penal provisions under Rule 15 of Cenvat Credit Rules, 2004:
The department invoked penal provisions under Rule 15 of Cenvat Credit Rules, 2004, along with Sections 76 and 78 of the Finance Act, 1994. However, the Tribunal's decision to dismiss the appeal rendered the application of penal provisions moot in this case.

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