2018 (12) TMI 1531 - AT - Central Excise

CENVAT Credit - capital goods or not - TMT Steel and PP Cement - credit reversed on being pointed out - demand of interest for delayed reversal of credit - imposition of penalty - Held that - The fact is not under dispute that the disputed goods were used by the appellant in the fabrication of structure of capital goods namely sugar mill machinery, boiler house, power generation and power house, which are essential plants for ultimate manufacture of the final product - The period in dispute is from April 2006 to December 2007, which was covered under the un-amended definition of input (effective up to 7th July 2009). Under such un-amended provisions of Rule 2 (k) of the rules, there were restrictions for not allowing the Cenvat benefit on those structural items - Since specific restrictions were brought into the definition clause only with effect from 7th July 2009, Cenvat benefit on such disputed goods cannot be denied for the period prior to such effective date. Retrospective applicability of the definition of input contained in Rule 2 (k) of the Rules - Held that - Though the Larger Bench of this Tribunal, in the case of Vandana Global Limited 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) , has upheld the views expressed by Revenue, but the Hon ble Chhattisgarh High Court in the case of said appellant M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT by relying on the Gujarat High Court judgment in the case of Mundra Ports & Special Economic Zone Ltd. 2015 (5) TMI 663 - GUJARAT HIGH COURT , has held that in absence of any specific mention about the retrospective application of the definition of input, the same should be considered as prospective in effect. Credit cannot be denied - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat Credit on TMT Steel and PP Cement as capital goods.
2. Denial of Cenvat benefit by the department.
3. Applicability of the definition of input under the Cenvat Credit Rules, 2004.
4. Interpretation of retrospective applicability of the definition of input.
5. Comparison with previous tribunal decisions and High Court judgments.

Analysis:
1. The appellant availed Cenvat Credit on TMT Steel and PP Cement, considering them as capital goods used in the fabrication of structures essential for manufacturing the final product. The department denied this credit, stating that these items were not eligible for Cenvat benefit as per the definition of 'capital goods' or 'inputs'.

2. The disputed period was from April 2006 to December 2007, governed by the un-amended definition of input under the Cenvat Credit Rules. The appellant argued that since there were no restrictions on availing Cenvat Credit on TMT Steel and PP Cement during this period, the benefit should not be denied.

3. The appellant contended that the disputed goods were crucial for the manufacturing process, and hence, Cenvat benefit should not be withheld. The appellant referenced the decision of the Larger Bench in the case of Vandana Global Ltd., which was later overruled by the Chhattisgarh High Court.

4. The Tribunal examined the retrospective applicability of the definition of input. While the Larger Bench upheld the Revenue's views in Vandana Global Ltd., the Chhattisgarh High Court held that in the absence of specific mention, the definition should be considered prospective. The Tribunal also considered the judgment in the case of Mundra Ports & Special Economic Zone Ltd.

5. Referring to the recent Larger Bench decision in the case of Mangalam Cement Ltd., the Tribunal allowed Cenvat benefit on cement and steel items used for machinery structure, treating them as "accessories of capital goods." Based on these precedents and interpretations, the Tribunal found no merit in the department's denial of Cenvat benefit and allowed the appeal in favor of the appellant.