2018 (2) TMI 1097 - AT - Central Excise

Tribunal favors assessee, rejects Revenue appeal, grants consequential benefits. Emphasizes interpretational clarity and prospective legal amendments.

The Tribunal allowed the appeals of the assessee, rejecting the appeal filed by the Revenue. The appellant was entitled to consequential benefits in ... CENVAT credit - inputs/capital goods - whether the appellant-assessee, a manufacturer of Sugar, etc., is entitled to Cenvat credit on Steels goods such as Shape & Section, angles, M.S. Plates/rounds, beams, rails etc. falling under Chapter Heading 72, 73 & 83 of CET Act, also welding electrodes used in fabrication/construction of capital goods including structural support, etc. - whether the demand is barred by limitation and whether the appellant is liable for interest and penalty? Held that: - The Hon’ble Andhra Pradesh High Court in CCE V/s Sai Samhita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] have held that the assessee engaged in business of providing storage and warehousing services, is entitled to take Cenvat credit on inputs like Cement, Iron Bars, Pipes etc. used in construction of warehouse, without which the assessee could not have provided the taxable service of storage & warehousing - the appellant have constructed/fabricated machinery and its support structures, accordingly they are entitled to Cenvat credit on the goods in question including welding electrodes, relying on the findings of Hon’ble Madras High Court in India Cement [2015 (3) TMI 661 - MADRAS HIGH COURT]. Extended period of limitation - Held that: - issue being wholly interpretational as there existed contrary judgments of this Tribunal, extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant. Issues Involved:1. Entitlement to Cenvat credit on steel goods and welding electrodes used in fabrication/construction of capital goods.2. Prospective effect of exclusions provided in Explanation-2 of Rule 2(k) of CCR, 2004.3. Whether the demand is barred by limitation.4. Liability for interest and penalty.Issue-wise Detailed Analysis:1. Entitlement to Cenvat Credit on Steel Goods and Welding Electrodes:The appellant-assessee, a manufacturer of sugar, claimed Cenvat credit on steel goods such as shapes, sections, angles, M.S. plates/rounds, beams, rails, and welding electrodes used in the fabrication and construction of capital goods, including structural support. The Tribunal referred to several rulings, including the appellant's own case (Final Order No. 57918/2013), where it was held that steel items used for repair and maintenance or fabrication of sugar mill machinery are eligible for Cenvat credit. The Tribunal noted that the use of welding electrodes for repair and maintenance is supported by judgments from the Rajasthan, Chhattisgarh, and Karnataka High Courts. The Tribunal emphasized that repair and maintenance are integral to manufacturing, making the items used therein eligible for Cenvat credit.2. Prospective Effect of Exclusions in Explanation-2 of Rule 2(k) of CCR, 2004:The Tribunal cited the Hon’ble Gujarat High Court in Mundra Port & Special Economic Zone Ltd. Vs. CCE, which held that the Explanation-2 in Rule 2(k) of CCR, 2004, inserted w.e.f. 07.07.2009, has only prospective effect. This was because there was nothing in the Amending Act to suggest that the amendment was clarificatory in nature. This interpretation was further supported by the Hon’ble Andhra Pradesh High Court in CCE Vs. Sai Samhita Storages (P) Ltd.3. Whether the Demand is Barred by Limitation:The Tribunal held that the issue was interpretational, given the existence of contrary judgments by different benches of the Tribunal. Consequently, the extended period of limitation was not invokable. This finding was crucial in determining that the demand raised by the Revenue was barred by limitation.4. Liability for Interest and Penalty:Given that the Tribunal found the appellant entitled to Cenvat credit and that the demand was barred by limitation, it followed that the appellant was not liable for interest and penalty. The Tribunal relied on the principle that when the issue is interpretational and there are conflicting judgments, penalties and interest are not warranted.Conclusion:The Tribunal allowed the appeals of the assessee, rejecting the appeal filed by the Revenue. The appellant was entitled to consequential benefits in accordance with the law. The cross-objection was also disposed of. The decision underscored the importance of interpretational clarity and the prospective application of legal amendments.