Tribunal grants appeal, sets aside Cenvat credit demand pre-07.07.2009, upholds remaining demand, no penalties.

The Tribunal allowed the appeals, setting aside the demand for Cenvat credit availed before 07.07.2009, granting consequential benefits. The remaining demand was upheld as conceded, with no penalties imposed due to legal uncertainty.

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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 Rs. 3,57,38,719/- and Rs. 1,50,82,283/- availed before 07.07.2009 and allowed the appeals with consequential benefits. The remaining demand of Rs. 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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