CENVAT credit on embedded structures and fabrication materials denied; 2009 amendment held prospective, not retrospective.
Structures permanently embedded in earth do not qualify as capital goods for CENVAT credit because they do not retain the character of excisable goods. Goods such as angles, joists, beams, bars and plates used to fabricate civil foundations or supporting structures are likewise not admissible as inputs for capital goods or in relation to the final products, as they lack the required nexus with manufacture under the rules. The CENVAT (Amendment) Rules, 2009 were held to be prospective and not clarificatory or retrospective, since the amending text did not clearly indicate any intention to remove ambiguity or alter prior entitlement. The assessees succeeded and the Revenue's appeals failed.
Issues: (i) Whether structures embedded in earth can be treated as capital goods under the CENVAT Credit Rules, 2004; (ii) Whether goods such as angles, joists, beams, bars and plates used in fabrication of such structures are admissible as inputs for capital goods or in relation to the final products; (iii) Whether the amendment introduced by the CENVAT (Amendment) Rules, 2009 is retrospective and clarificatory.
Issue (i): Whether structures embedded in earth can be treated as capital goods under the CENVAT Credit Rules, 2004.
Analysis: The rule-making power under Section 37 of the Central Excise Act, 1944 enables credit on goods used in or in relation to manufacture, but capital goods for the purpose of credit must answer the description of excisable goods. Structures permanently embedded to earth do not satisfy that requirement, and their treatment depends on the settled position governing excisability of such structures.
Conclusion: Structures embedded in earth are not capital goods for the purpose of credit.
Issue (ii): Whether goods such as angles, joists, beams, bars and plates used in fabrication of such structures are admissible as inputs for capital goods or in relation to the final products.
Analysis: Goods used for laying foundations or for constructing supporting structures are not treated as inputs either for capital goods or in relation to the final products. Credit is available only where the goods are sufficiently connected with manufacture in the manner contemplated by the rules, and the materials used for civil foundation or supporting structures do not meet that test.
Conclusion: Credit on such goods is not admissible.
Issue (iii): Whether the amendment introduced by the CENVAT (Amendment) Rules, 2009 is retrospective and clarificatory.
Analysis: The amendment was not expressed to be clarificatory, and there was nothing in the amending text to indicate that it was intended to remove ambiguity in the existing provision. A new amendment enlarging or altering the coverage of credit cannot be treated as retrospective merely because it concerns input credit; it operates prospectively unless the legislature clearly provides otherwise.
Conclusion: The amendment is prospective and not clarificatory or retrospective.
Final Conclusion: The appeals succeeded for the assessees, the Tribunal's contrary view was set aside, and the Revenue's appeals failed.
Ratio Decidendi: For CENVAT credit, only goods that retain the character of excisable goods and are used in the statutory sense in or in relation to manufacture can qualify, while amendments affecting credit entitlement operate prospectively unless clearly made retrospective.