2019 (5) TMI 1583 - HC - Central Excise

CENVAT Credit - capital goods/inputs or not - M.S. Plates, M.S. Channels, H.R. Coils, M.S. Angles etc. - said items were either used by the respondent in repair or maintenance of existing plant or in modification of their existing plant and machinery which are embedded to the earth - the conditions of move-ability and marketability to be accorded the status of goods fulfilled or not - period 2005-06 to August, 2008. HELD THAT - The Revenue has relied upon the larger Bench decision of the Tribunal in the case of VANDANA GLOBAL LTD. VERSUS CCE 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) , wherein it was held that the explanation added to the definition of capital goods w.e.f. 07.07.2009 has to be held as explanatory and thus retrospective in nature. The said decision of the Tribunal was considered by the Honble Gujarat High Court in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2015 (5) TMI 663 - GUJARAT HIGH COURT , wherein the said decision was not approved by the Honble High Court and observed that the amendment made on 7-7-2009 cannot be held to be clarificatory and as such would be applicable only prospectively. 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 cenvet credit on MS Rod, sheets, MS Channel, MS Plate etc. used for fabrication of structures to support various machines/capital goods. Thus, since items used by the respondent-assessee were used as structure to hold the capital goods, hence, it is wrong to say that respondents are not eligible to CENVAT credit. Therefore, in our considered opinion, the Tribunal has rightly allowed the appeal and the reasoning given by the Tribunal cannot be said to be not cogent or correct appreciation of evidence on record. We are of the view that ratio laid down by the M/S BAJAJ HINDUSTHAN LTD 2013 (3) TMI 365 - ALLAHABAD HIGH COURT is not at all applicable under the facts and circumstances of the case. We have no manner of doubt that the Tribunal has rightly held respondent-assessee is entitled to Cenvat Credit in respect of items used as structural support for capital goods - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the Tribunal was correct in setting aside the Order in Original dated 13/10/2010 ignoring the decision in Bajaj Hindustan Ltd. Vs. Union of India.
2. Whether the Tribunal ignored Circular No. 966/09/2012-CX.1 dated 18/05/2012.
3. Whether the impugned Final Order dated 15/05/2017 passed by the Tribunal is substantial as per Rule 2 (k) of the CENVAT Credit Rules, 2004.

Issue-wise Detailed Analysis:

1. Tribunal's Decision vs. Bajaj Hindustan Ltd. Judgment:
The Tribunal's decision to set aside the Order in Original dated 13/10/2010 was challenged on the grounds that it ignored the precedent set in Bajaj Hindustan Ltd. Vs. Union of India. The Tribunal, however, based its decision on the fact that the items in question (MS Plates, MS Channels, HR Coils, MS Angles, etc.) were used for the fabrication of capital goods, repair and maintenance, and staging/supporting structures necessary for manufacturing excisable products. The Tribunal's decision was supported by the respondent's counsel, who argued that the Bajaj Hindustan Ltd. case did not establish a general law regarding the non-availability of CENVAT credit for such items but was specific to the facts where the usage of materials was not demonstrated. The High Court agreed with the Tribunal, noting that Bajaj Hindustan Ltd. did not formulate or answer any question of law relevant to the present case.

2. Ignoring Circular No. 966/09/2012-CX.1:
The appellant contended that the Tribunal ignored Circular No. 966/09/2012-CX.1, which clarified that structural components used for laying foundations or making structures to support capital goods are not eligible for CENVAT credit. The respondent countered that the circulars dated 2.4.2012 and 18.5.2012 were issued in the context of the amended definition of inputs under Rule 2 (k) of the CENVAT Credit Rules, 2004, applicable from 1.3.2011, and were not relevant for the period in question (2005-06 to August 2008). The High Court found that these circulars did not apply to the period under dispute and thus upheld the Tribunal's decision.

3. Substantiality of the Tribunal's Final Order:
The Tribunal's final order was questioned for its adherence to Rule 2 (k) of the CENVAT Credit Rules, 2004. The respondent argued that during the relevant period, Rule 2 (k) included goods used in the manufacture of capital goods within the factory. The High Court reviewed the amendments to Rule 2 (k) and noted that prior to the amendment on 7.7.2009, the rule allowed CENVAT credit for goods used in the manufacture of capital goods within the factory. The Tribunal's decision was consistent with this interpretation, as supported by various High Court judgments that deemed structural supports for capital goods eligible for credit. The High Court concluded that the Tribunal's decision was a correct appreciation of the evidence and legal provisions applicable at the time.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision that the respondent-assessee was entitled to CENVAT credit for the items used as structural support for capital goods. The Tribunal's order was deemed legally sound, and the reliance on subsequent circulars and the Bajaj Hindustan Ltd. case was found inapplicable to the facts and period in question. The appeal was dismissed without any order as to costs.