2024 (9) TMI 404 - HC - Central Excise

CENVAT Credit - input - cement and TOR steel used for erection/installation of plant/machinery - reliance placed upon unamended Explanation 2 to Rule 2 (k) of the Rules of 2004 - dismissal of appeal without considering the submissions made by the appellant - principles of natural justice - HELD THAT - On account of divergent views of various Benches of the Tribunal the issue as to whether the Cement and Steel Bars used in the Structural foundation to support the plant and machinery embedded qualified either as Capital Good or Input was referred to a Larger Bench by the Tribunal. The Larger Bench in the case of M/s. Manglam Cement Limited Vs. CCE Jaipur-I 2018 (3) TMI 1547 - CESTAT NEW DELHI after considering the decisions of the Supreme Court and amendment of the explanation allowed the claim of the assessee after recording a factual finding that the use of cement and steel was for laying foundation for erection of Capital Goods . Nothing has been put before this Court to show that the Department has successfully challenged the decision of the Larger Bench. In view of the decision of the Larger Bench it would be appropriate that orders of the Tribunal are set aside. The matter is remitted to the Tribunal to decide the issue afresh in accordance with law after considering the usage to which Cement and Steel was put to - Appeal disposed off.

Summary

Issues:
1. Interpretation of CENVAT Credit Rules regarding the eligibility of Cement and Steel Bars as 'inputs' or 'capital goods'.
2. Consideration of contradictory views of the Customs, Excise & Service Tax Appellate Tribunal.
3. Reference to the amendment of Explanation 2 to Rule 2 (k) of the CENVAT Credit Rules.
4. Admissibility of the appeal and formulation of substantial questions of law.
5. Referral of the issue to a Larger Bench by the Tribunal.
6. Decision of the Larger Bench in M/s. Manglam Cement Limited Vs. CCE, Jaipur-I.
7. Setting aside of Tribunal's orders and remittance of the matter for fresh consideration.

Analysis:
The judgment by the High Court of Rajasthan involves the interpretation of the CENVAT Credit Rules concerning the eligibility of Cement and Steel Bars as either 'inputs' or 'capital goods'. The appellant, engaged in Cement manufacturing, claimed CENVAT Credit for various materials used in plant erection. The case revolves around the unamended Explanation 2 to Rule 2 (k) of the Rules of 2004. The Tribunal had conflicting views on the issue, leading to appeals from both the Department and the assessee.

The Tribunal's decision on the retrospective operation of the amended Explanation 2 was contested, citing the Chhattisgarh High Court's ruling and dismissal of a Special Leave Petition. The issue had been settled by various High Courts, making it non-res integra. The appeal before the High Court raised substantial questions of law regarding the qualification of Cement and TOR Steel as 'inputs' and the Tribunal's dismissal without considering the appellant's submissions.

Due to conflicting Tribunal decisions, the issue was referred to a Larger Bench, which, in the case of M/s. Manglam Cement Limited Vs. CCE, Jaipur-I, allowed the claim after determining that Cement and Steel were used for laying the foundation of 'Capital Goods'. The Department did not challenge this decision successfully. Consequently, the High Court set aside the Tribunal's orders and remitted the matter for fresh consideration, emphasizing the importance of evaluating the usage of Cement and Steel in determining eligibility for CENVAT Credit.

In conclusion, the High Court disposed of the appeals based on the decision of the Larger Bench, rendering pending applications irrelevant. The judgment clarifies the eligibility criteria for CENVAT Credit under the CENVAT Credit Rules, providing guidance for future cases involving similar issues.