2016 (8) TMI 343 - AT - Central Excise

Tribunal grants sugar manufacturer Cenvat credit on steel goods, welding electrodes

The Tribunal ruled in favor of the appellant, a sugar manufacturer, allowing Cenvat credit on steel goods and welding electrodes used in constructing ... Cenvat credit - Entitlement - Steel goods - Held that:- by relying on the finding of Hon'ble Madras High Court in the case of India Cements Ltd. Vs. Cestat [2015 (3) TMI 661 - MADRAS HIGH COURT] and Hon'ble Gujarat High Court in the case of Mundra Port & Special Economic Zone Ltd. Vs. CCE [2015 (5) TMI 663 - GUJARAT HIGH COURT], Shape & Section, angles, M.S. Plates/rounds, beams, rails etc. and also welding electrodes used in fabrication/construction of capital goods including structural support, etc. for the period Feb/ 2007 to June/2009 are entitled to Cenvat credit. Limitation - Demand - Invokation of extended period of limitation - Held that:- as their are existed contrary judgements of this Tribunal, extended period of limitation is not invokable. - Decided in favour of appellant with consequential relief Issues Involved:1. Entitlement to Cenvat credit on steel goods and welding electrodes used in the fabrication/construction of capital goods.2. Prospective effect of exclusions provided in explanation-2 of Rule 2(k) of CCR, 2004.3. Applicability of the extended period of limitation.4. Liability for interest and penalty.Detailed Analysis:1. Entitlement to Cenvat Credit on Steel Goods and Welding Electrodes:The appellant, a manufacturer of sugar, claimed Cenvat credit on steel items (Shape & Section, Angles, M.S. Plates/rounds, Beams, Rails) and welding electrodes used in the fabrication/construction of capital goods for the period from February 2007 to June 2009. The Revenue argued that these items do not qualify as inputs or capital goods under Rule 2 of the CCR, 2004, and issued a show cause notice for recovery of Rs. 1,03,34,766 along with interest and penalties. The Commissioner confirmed the demand, stating that the items were used for constructing support structures and base frames, which do not qualify for Cenvat credit. However, the appellant relied on previous Tribunal rulings and High Court judgments which recognized the eligibility of such items for Cenvat credit when used for repair, maintenance, or fabrication of machinery.2. Prospective Effect of Exclusions Provided in Explanation-2 of Rule 2(k) of CCR, 2004:The Commissioner held that the explanation-2 inserted in Rule 2(k) of CCR, 2004, with effect from 07.07.2009, had retrospective effect, following the Larger Bench ruling in Vandana Global Ltd. The appellant contested this, citing the Gujarat High Court's decision in Mundra Port & Special Economic Zone Ltd. v. CCE, which held that the amendment had only prospective effect, as there was no indication that it was clarificatory in nature. The Tribunal agreed with the appellant, stating that the amendment does not apply retrospectively.3. Applicability of the Extended Period of Limitation:The Commissioner invoked the extended period of limitation, arguing that periodic audits by Revenue did not imply knowledge of the wrong availment of credit. The appellant contended that the issue was interpretational, and there were contrary judgments on the matter. The Tribunal found the appellant's argument persuasive, noting the existence of conflicting judgments and ruling that the extended period of limitation was not applicable.4. Liability for Interest and Penalty:Given that the Tribunal found in favor of the appellant on both the merits of the case and the limitation period, it concluded that the appellant was not liable for interest and penalties. The Tribunal emphasized that the appellant had acted based on an interpretation of the law that was supported by several judicial precedents.Conclusion:The Tribunal set aside the impugned order, holding that the appellant was entitled to Cenvat credit on the goods in question, including welding electrodes. It was also determined that the extended period of limitation was not applicable due to the interpretational nature of the issue. Consequently, the appellant was not liable for interest and penalties and was entitled to consequential benefits in accordance with the law. The Tribunal's decision was pronounced in the open court at the conclusion of the hearing.