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2024 (5) TMI 1331 - AT - Central ExciseCENVAT Credit - inputs used for fabrication of support structures - Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 - period 2005-06 to August 2008 - extended period of limitation. Denial of credit on the grounds that the credit on inputs utilized for construction of support structures for plant and machinery is not admissible in terms of exclusion clause in Explanation 2 to Rule 2(k) of Cenvat Credit Rules. HELD THAT - 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 M/S. INDIA CEMENTS LTD. VERSUS THE CUSTOM, EXCISE AND SERVICE TAX THE COMMISSIONER OF CENTRAL EXCISE, 2015 (3) TMI 661 - 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. In M/S. THIRU AROORAN SUGARS, M/S. DALMIA CEMENTS (BHARAT) LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE 2017 (7) TMI 524 - MADRAS HIGH COURT , a Division Bench of the Madras High Court held that irrespective of whether user test is applied, or the test that they are an integral part of the capital goods is applied, all such items fell within the scope and ambit of both Rule 2(a)(A) and 2(k) and, therefore, Cenvat credit was to be allowed on such goods. The impugned order cannot be sustained and is accordingly set aside. The appeal filed by the Appellant is allowed.
Issues Involved:
1. Denial of CENVAT Credit on inputs used for capital goods and support structures. 2. Retrospective application of amended Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004. 3. Applicability of the Larger Bench decision in Vandana Global case. 4. Reliance on circulars issued after the period in dispute. 5. Interpretation of the term "inputs" under Rule 2(k) of CENVAT Credit Rules, 2004. Detailed Analysis: 1. Denial of CENVAT Credit on Inputs Used for Capital Goods and Support Structures: The Appellant procured various iron and steel materials used for the installation and fabrication of capital goods and structural support within the factory. The Adjudicating Authority denied CENVAT Credit on the grounds that these items were used in supporting structures for different capital goods and machineries, which is not admissible as per the exclusion clause in Explanation 2 to Rule 2(k) of the CENVAT Credit Rules. The Authority relied on the decision of the Tribunal's Larger Bench in Vandana Global, which held that the amendment to Explanation 2 was clarificatory and had retrospective effect. 2. Retrospective Application of Amended Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004: The Appellant argued that the period in dispute (September 2008 to September 2009) partially falls before the amendment of Explanation 2 to Rule 2(k) by Notification No.16/2009-CE(NT) dated 07.07.2009. The Appellant contended that the amendment should not be applied retrospectively and that the extended period of limitation is not invokable due to the complex legal issue and conflicting opinions necessitating a reference to the Larger Bench in Vandana Global. 3. Applicability of the Larger Bench Decision in Vandana Global Case: The Appellant submitted that the Vandana Global decision, which held the amendment to Explanation 2 to be clarificatory and retrospective, was not good law. This assertion was supported by judgments from the Gujarat High Court in Mundra Ports & Special Economic Zone Ltd., the Madras High Court in India Cement Ltd. and Thiru Arooran Sugars, and the Allahabad High Court in CCE Lucknow vs. Mankapur Chini Mills, which held that the amendment was not retrospective and should be applied prospectively. 4. Reliance on Circulars Issued After the Period in Dispute: The Appellant argued that the circular dated 02.04.2012, issued in the context of the amended definition of inputs under Rule 2(k) of the CENVAT Credit Rules, 2004, should not be relied upon to interpret the scope of inputs during the period 2005-06 to August 2008. The statutory framework during the disputed period was different, and the circulars issued later have no bearing on the interpretation of the rules applicable at that time. 5. Interpretation of the Term "Inputs" Under Rule 2(k) of CENVAT Credit Rules, 2004: The Tribunal examined the definition of "input" under Rule 2(k) as it stood before and after the amendment on 07.07.2009. The original rule included goods used in the manufacture of capital goods used within the factory, while the amended rule excluded items used for construction of factory sheds, buildings, laying foundations, or making structures for support of capital goods. The Tribunal noted that the Madras High Court in India Cement and Thiru Arooran Sugars, and the Allahabad High Court in Mankapur Chini Mills, had held that items used as structures to hold capital goods were eligible for CENVAT credit before the amendment. Conclusion: The Tribunal found that the facts of the present case were covered by the judgments of the Gujarat, Madras, and Allahabad High Courts, which held that the amendment to Explanation 2 to Rule 2(k) was not retrospective. The reliance on Vandana Global was misplaced, and the circulars issued after the disputed period were irrelevant. Consequently, the denial of CENVAT credit by the Adjudicating Authority was unsustainable. The appeal was allowed with consequential benefits as per law, and the impugned order was set aside.
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