2016 (8) TMI 840 - AT - Central Excise

Tribunal rules amendment not retroactive, dismisses Department's appeal on merits and limitation

The Tribunal held that the amendment to Rule 2(k) of CCR did not have retrospective effect and the demand was barred by limitation due to the Department's ... Cenvat credit - MS Channels, MS Angles, Plates, Rounds, Beams etc. - used in fabrication of supporting structures to Capital Goods during the period from 2007-08 to 2008-09 - Whether amendment of Explanation 2 to Rule 2(k) of CCR inserted vide Notification No. 16/2009-CE dt. 07/07/2009 will have retrospective effect - Held that:- it is clear from the Explanation 2 to Rule 2(k) that nowhere in the amendment, nothing has been explicitly stated or clarified that the amendment will have retrospective effect. The doctrine of fairness is also an important requisite in giving retrospective effect to amendments. In case, benefits were extended and availed as permitted in earlier law, it would be unfair to snatch them away simply by insertion of an amendment to that effect. An amendment which seeks to lend further clarity to an existing statutory provision can definitely be retrospective if so unequivocally stated so in the body of the amendment or in the statement purpose by the legislature, however such amendment can only throw more light on a existing provision but should not extinguish the rights availed of before the amendment. Period of limitation - Held that:- I do not find any infirmity in the finding of Commissioner(Appeals) that in view of similar demand issued to the same respondent on identical issue for earlier period, which has been decided in their favour, the law of limitation will hit the issue of impugned demand. This is a correct interpretation of law and is supported by a plethora of judgments of various courts. - Decided against the Revenue Issues Involved:1. Retrospective effect of Explanation 2 to Rule 2(k) of CENVAT Credit Rules (CCR) inserted by Notification No. 16/2009-CE dated 07/07/2009.2. Applicability of limitation period in light of a previous order on the same issue for the same respondent.Issue-Wise Detailed Analysis:1. Retrospective Effect of Explanation 2 to Rule 2(k) of CCR:The primary contention was whether the amendment to Rule 2(k) of CCR, introduced by Notification No. 16/2009-CE, which excludes certain steel items used for making support structures of capital goods from the definition of 'input,' has retrospective effect. The Department argued that the amendment was clarificatory and thus applicable retrospectively. However, the Tribunal found that the amendment did not explicitly state it would have retrospective effect. The Tribunal referred to the decision in Vandana Global Ltd., which was admitted for appeal by the Hon'ble Chhattisgarh High Court and distinguished in subsequent judgments, such as CC&CE, Vishakhapatnam vs. APP Mills. The Tribunal also cited the Hon'ble High Court of Calcutta's disapproval of the Vandana Global judgment in Alloy Industries Ltd. vs. UOI, emphasizing that retrospective application of amendments should not extinguish rights availed before the amendment.2. Applicability of Limitation Period:The second issue was whether the present demand was barred by limitation, given a previous order on the same issue for the same respondent. The Commissioner (Appeals) had found that a similar demand for an earlier period was decided in favor of the respondent, and thus the Department was aware of the issue. The Tribunal upheld this view, stating that invoking an extended period for issuing the show cause notice was not justified. The Tribunal referenced various judgments supporting the principle that once an issue has been settled in favor of the assessee, subsequent demands on the same issue are barred by limitation.Conclusion:The Tribunal concluded that the amendment to Rule 2(k) of CCR did not have retrospective effect and that the demand was barred by limitation due to the Department's prior knowledge of the issue. Consequently, the Department's appeal was dismissed on both merits and limitation grounds.