2019 (5) TMI 969 - AT - Central Excise

Effect of Notification - N/N.16/2009 dated 07 July, 2009 - Retrospective or Prospective effect - CENVAT Credit - capital goods - MS angles, channels, section, etc. - period from May 2007 to June 2009 - whether N/N. 16/2009 dated 07 July, 2009 can be made applicable retrospectively, the period for demand in the impugned Appeal being from May 2007 to June 2009, i.e., prior the impugned Notification? - HELD THAT - Clause 1(1) of the Notification reads that the amended Rules shall be called Cenvat Credit (Amendment) Rules, 2009. Rule 1(2) reads that these Rules shall come into force on the date of their publication in the Official Gazette. It is apparent from the Notification that it was published in the Gazette on 07 July, 2009 itself. The bare perusal makes it clear that the intention of legislature while incorporating the amendments in Cenvat Credit Rules, 2004 was for the Notification to take effect from the date of it being officially gazetted. The Circular dated 08 July, 2010 as relied upon by the Department to give this Notification a retrospective effect is not binding and in fact cannot be looked into in view of the statute itself. The Order under challenge holding the Notification to apply retrospectively is hereby set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing cenvat credit on certain items treated as capital goods
- Denial of credit based on retrospective application of Notification No. 16/2009
- Interpretation of Rule 2k of Cenvat Credit Rules, 2004
- Applicability of Notification retrospectively

Analysis:
- The case involved the appellants availing cenvat credit on items like MS bars, plates, sheets, caps, channels, and angles, treating them as capital goods, which the Department contested, alleging wrongful credit availing totaling &8377;9,87,908 from May 2007 to June 2009. The Adjudicating Authority confirmed the denial and imposed penalties, leading to appeals up to the Tribunal.
- The appellant argued that the impugned items were inputs as per the rules existing during the period in question, citing the non-retrospective nature of Notification No. 16/2009. They relied on court decisions supporting their stance, emphasizing that a notification cannot have retrospective effect.
- The Department contended that the notification was clarificatory and hence applicable retrospectively, referring to a decision by a Larger Bench of the Tribunal. They highlighted the intention behind the amendment as clarificatory and not aimed at changing the rules' scope.
- The Tribunal analyzed the facts, noting that the impugned items ceased to qualify as inputs post the notification's introduction. The key issue was whether the notification could be applied retrospectively to the period in question (May 2007 to June 2009).
- Examining the notification's language and legal precedents, the Tribunal concluded that the notification was not intended to have retrospective effect. Court decisions and the wording of the notification supported this view, emphasizing that it came into force from its publication date in the Official Gazette.
- The Tribunal dismissed the Department's reliance on a circular to give the notification retrospective effect, stating that it was not binding and could not override the notification's clear language. The Tribunal also noted that the decision of the High Court, until overturned by the Supreme Court, had a binding effect, leading to the setting aside of the order and allowing the appeal.