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2017 (10) TMI 793 - AT - Central ExciseCENVAT credit - capital goods - M.S. Channels/ M.S. Plates/Joists/CTD bars/TMT bars and cement, used for construction of foundation and structures of capital goods such as pre-heater towers, raw mill house, storage tanks, clinker silo, factory buildings, roads/drains and non plant buildings - Department however took the view that such foundations and structures are not capital goods - Denial of credit on the impugned items by the adjudicating authority has been done primarily relying on the ratio of Vandana Global Limited 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) and the Board circular No. 276/110/96-3TRU, dated 02.12.1996. Held that - the said legal position by Ld. adjudicating authority has been over-taken by subsequent judgments of higher forums - in a recent judgment of the Hon ble High Court of Madras in the case of Thiru Arooran Sugars, Thirumandakudi and Dalmia Cements (Bharat) Limited 2017 (7) TMI 524 - MADRAS HIGH COURT , relying upon their earlier judgments and that of the Hon ble Apex Court in the case of Saraswati Sugar Mills vs. CCE, Delhi-III 2011 (8) TMI 4 - SUPREME COURT OF INDIA , it has been held that M.S. structural which support the plant & machinery should get the benefit of cenvat credit. The disputed credit on various appeals, having been availed before the amendment to rule 2(k) of Cenvat Credit Rules, 2004, w.e.f. 07.07.2009, cannot sustain and will have to be set aside which we hereby do - appeal allowed. Penalties - Held that - it cannot be disputed that the issue per se was in litigation and the same was settled only by the judgments - penalties set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of Cenvat credit on steel items and cement used for construction of foundations and structures. 2. Retrospective application of amendments to Rule 2(k) of Cenvat Credit Rules, 2004. 3. Validity of penalties imposed for alleged irregular availment of Cenvat credit. Detailed Analysis: 1. Eligibility of Cenvat Credit on Steel Items and Cement: The appellants, manufacturers of cement products, availed Cenvat credit on steel items and cement used for constructing foundations and structures of capital goods. The department contended that such items did not qualify as 'capital goods' or 'inputs' under Rule 2 of Cenvat Credit Rules, 2004. The appellants argued that these items were eligible for credit based on prevailing legal provisions and judicial precedents. The Tribunal referred to several judgments, including the Gujarat High Court in Mundra Ports & SEZ Ltd, which held that steel and cement used in construction are entitled to input credit and that amendments to Rule 2(k) are not clarificatory but prospective. Similarly, the Madras High Court in India Cements Ltd and Thiru Arooran Sugars held that structural steel items used for capital goods erection qualify for Cenvat credit. Consequently, the Tribunal concluded that the credit availed before the amendment on 07.07.2009 was valid. 2. Retrospective Application of Amendments to Rule 2(k): The Tribunal examined whether the amendment to Rule 2(k) effective from 07.07.2009, which excluded certain items from the definition of 'inputs,' could be applied retrospectively. The appellants contended that the amendment should apply prospectively, supported by the Gujarat High Court's decision in Mundra Ports & SEZ Ltd, which clarified that legislative intent for retrospective application must be explicit. The Tribunal agreed, noting that the amendment could not be applied retrospectively to deny credit availed before 07.07.2009. 3. Validity of Penalties Imposed: The department imposed penalties on the appellants for allegedly irregularly availing Cenvat credit. The appellants argued that the issue was under litigation and only settled by higher judicial forums' judgments. The Tribunal found merit in the appellants' plea, noting that the legal position was clarified only through subsequent judgments. Therefore, it held that penalties were unwarranted and set aside the penalties imposed. Conclusion: The Tribunal set aside the impugned orders confirming the demand of ?3,57,38,719/- and ?1,50,82,283/- availed before 07.07.2009 and allowed the appeals with consequential benefits. The remaining demand of ?3,78,942/- was upheld as conceded by the appellants. No penalties were imposed due to the legal uncertainty surrounding the issue. Both appeals were disposed of accordingly.
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