Cenvat credit on construction inputs and transport service allowed pre-amendment; penalty rejected in an interpretational dispute.

Cenvat credit on cement, TMT bar, beams, angles, channels, joists and related inward transportation service was admissible for the period up to 06/07/2009 because the amended input definition was not applied to deny pre-amendment credit, and the disapproved Larger Bench view could not govern the controversy. For the period after 07/07/2009, penalty was not justified because substantial credit had already been reversed and the dispute remained one of statutory interpretation; deliberate suppression was not established. The ruling therefore accepted credit for the pre-amendment period and rejected penalty on the facts.

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Issues: (i) Whether Cenvat credit on cement, TMT bar, beam, angle, channels and joist, together with related inward transportation service tax credit, was admissible for the period up to 06/07/2009; (ii) Whether the demand for the period after 07/07/2009 justified penalty when substantial credit had already been reversed and the dispute turned on interpretation of law.

Issue (i): Whether Cenvat credit on cement, TMT bar, beam, angle, channels and joist, together with related inward transportation service tax credit, was admissible for the period up to 06/07/2009.

Analysis: The demand had been sustained below by treating the amendment to the definition of input under the Cenvat Credit Rules, 2004 as applicable against the assessee. The Tribunal noted that the Larger Bench view relied upon by the adjudicating authority had been disapproved, and that the credit on the specified goods and the connected inward transportation service was allowable for the pre-amendment period. The conclusion was also supported by the applicability of the user test for determining admissibility of such goods as inputs or capital-related items.

Conclusion: The credit on the specified goods and the related transportation service was held admissible up to 06/07/2009, in favour of the assessee.

Issue (ii): Whether the demand for the period after 07/07/2009 justified penalty when substantial credit had already been reversed and the dispute turned on interpretation of law.

Analysis: For the post-07/07/2009 period, the records showed reversal of a substantial portion of the credit. The Tribunal treated the controversy as one of statutory interpretation and held that deliberate suppression was not established on the facts of the case.

Conclusion: Penalty was not sustainable on the footing of deliberate suppression, in favour of the assessee.

Final Conclusion: The assessee succeeded on the principal credit issue for the pre-amendment period, and the penalty element could not be sustained on the facts and legal controversy involved.

Ratio Decidendi: Where the governing definition of input is under interpretative dispute and the contrary Larger Bench view has been disapproved, Cenvat credit on the covered goods and related inward transportation service cannot be denied for the period before the operative amendment, and penalty requires proof of more than a bona fide interpretational controversy.

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