2023 (8) TMI 1231 - AT - Central Excise

CENVAT Credit - steel items used in the manufacture of support structures for capital goods - denial of credit based on Explanation 2 as amended vide Notification No.16/2009-CE (NT), dated 7-7-2009 - period 2005-06 to August 2008 - HELD THAT - At that relevant time, Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 provided that inputs include goods used in the manufacture of capital goods, which are further used in the factory of manufacturer. The aforesaid Rule 2(k) was amended vide the Notification No.16/2009-CE(NT) w.e.f. 07.07.2009. Explanation 2 to Rule 2(k) provides that inputs include goods used in the manufacture of capital goods which are further used in the factory of manufacturer, but shall not include cement, angles, channels, CTD bar or TMT bar and other items used for construction of company, shed, building or laying of foundation or making of structures for support of capital goods. From the perusal of the circulars dated 2-4-2012 and 18-5-2012, it comes out that these circulars have been issued in the changed context of the definition of Rule 2(k) of Cenvat Credit Rules, 2004 and both circulars have no concern for the period in issue. Thus, the reliance placed by the Revenue in this regard has no substance. The Madras High Court in THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. INDIA CEMENTS LIMITED OTHERS 2011 (8) TMI 399 - MADRAS HIGH COURT noticed VANDANA GLOBAL LTD. VERSUS CCE 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) but relied upon the Apex Court judgment in COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS LTD. 2010 (7) TMI 12 - SUPREME COURT , wherein the Apex Court has considered an issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set and after considering it, the Apex Court allowed the Cenvat credit on MS Rod, sheets, MS Channel, MS Plate, etc., used for fabrication of structures to support various machines/capital goods. The facts of the present case are squarely covered by the above mentioned judgements of the Hon ble High Courts - the impugned order cannot be sustained and is accordingly set aside - Appeal allowed.

Summary

Issues Involved:
1. Denial of CENVAT Credit on steel items used in the manufacture of support structures for capital goods.
2. Invocation of the extended period of limitation by the Department.
3. Interpretation of Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 and its amendments.
4. Reliance on the decision of the Larger Bench in Vandana Global and its retrospective applicability.
5. Relevance of circulars issued in 2012 to the period in dispute (2005-06 to August 2008).

Summary:

Denial of CENVAT Credit:
The Appellant challenged the impugned Order-in-Original which denied CENVAT Credit on steel items used for fabricating support structures for capital goods. The Adjudicating Authority allowed credits for structures under pollution control equipment and storage tanks but denied credits for support structures for other capital goods based on Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004, as amended by Notification No.16/2009-CE (NT).

Extended Period of Limitation:
The Department invoked the extended period of limitation alleging suppression by the Appellant. The Appellant argued that the issue involved interpretation of legal provisions with conflicting decisions, thus extended limitation was not applicable. The Tribunal found merit in the Appellant's argument, noting the legal complexity and absence of mala fide intention.

Interpretation of Explanation 2 to Rule 2(k):
The Tribunal examined the definition of "input" under Rule 2(k) as it stood during the relevant period and its amendments. Initially, inputs included goods used in the manufacture of capital goods within the factory. The 2009 amendment excluded certain items used for construction or making structures for support of capital goods. The Tribunal noted that the amendment was not applicable retrospectively as per the judgments of various High Courts.

Reliance on Vandana Global:
The Adjudicating Authority relied on the Larger Bench decision in Vandana Global, which deemed the 2009 amendment clarificatory and retrospective. However, the Tribunal noted that the Gujarat and Madras High Courts, as well as the Allahabad High Court, had held Vandana Global as not a good law, asserting that the amendment was prospective.

Relevance of 2012 Circulars:
The Tribunal found that circulars dated 2-4-2012 and 18-5-2012, issued in the context of the amended definition of inputs, were not relevant to the period in dispute (2005-06 to August 2008) and thus could not be relied upon.

Conclusion:
The Tribunal concluded that the denial of CENVAT Credit by the Adjudicating Authority was unsustainable. It set aside the impugned order and allowed the appeal with consequential benefits, in accordance with the law.