TaxTMI 
TaxTMI 
2017 (7) TMI 524
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....e matter of Vandana Global Limited V. Commissioner of Central Excise 2010 (253) E.L.T. 440. The judgment, rendered in: Vandana Global Limited V. Commissioner of Central Excise favours the Revenue. 3. We were informed by the counsels for the parties that a challenge has been laid to the decision of the Tribunal rendered in: Vandana clothing Limited V. Commissioner of Central Excise, and that it is pending consideration before the concerned Court, i.e., the Chhattisgarh High Court. 4. These appeals were admitted by this Court on different dates. C.M.A.No.3814 of 2011 was admitted on 22.12.2011, when, the following substantial question of law was framed for consideration by this Court: "Whether the order of the learned Tribunal inasmuch as it gives effect to the notification No.16/09 prior to 7.7.2009, overlooking the fact that the same is made expressly effective only from the aforesaid date?" 4.1. Whereas, C.M.A.Nos.2695 and 2696 of 2012 were admitted on 06.09.2012, when, the following substantial questions of law were framed for consideration by this Court: "1. Whether the order of the Tribunal is right in law inasmuch as it gives effect to the notification No.16/09 ....
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....cisable goods from its factory unit. 7.3. It appears that the verification of particulars was carried out by the officials of the Revenue, which revealed that TAS had availed of Cenvat Credit, during the period, spanning between, February, 2008 and March, 2008, vis-a-vis HR plates, MS channels and MS Joints, which, in turn, were used as "supporting structurals" to keep in position distillation machinery and evaporator (hereinafter referred to as structurals). 7.4. The Revenue, being of the view that the Cenvat Credit availed of qua aforementioned structurals, being not in order, served a show cause notice dated 25.02.2009, on TAS. The allegation in the show cause notice, qua TAS was that the structurals, which fell under Chapter 72 were not covered by the definition of capital goods, as provided in Rule 2 of the Cenvat Credit Rules, 2002 (in short, the '2002 Rules'). According to the Revenue, Cenvat Credit was only available, vis-a-vis goods falling in Chapter 82, 84, 85, 90 and heading 68.05 or 68.04. Since, the structurals came within the ambit of Chapter 72, Cenvat Credit, according to the Revenue, was wrongly availed of by TAS. 7.5. Furthermore, it was also all....
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....was passed by the Adjudicating Authority, which is, dated 18.08.2009. 10. Aggrieved by the aforementioned order, TAS preferred an appeal to the Commissioner of Customs and Central Excise (Appeals) [in short 'Commissioner (Appeals)]. The Commissioner (Appeals) allowed the appeal preferred by TAS vide order dated 29.06.2010. In passing the order, the Commissioner (appeals) relied upon the judgments, passed by the Tribunal. 11. This time around the Revenue was aggrieved and, therefore, an appeal was preferred with the Tribunal. The Tribunal, via a cryptic judgment reversed the order of the Commissioner (Appeals) by relying upon its own judgment, rendered by a Larger Bench, in Vandana Global Limited. 12. It is, in these circumstances that TAS has preferred an appeal with this Court. C.M.A.Nos.2695 and 2696 of 2012: 13. DCBL, which is the appellant in the aforementioned appeals, is in the business of manufacturing of Cement and Clinker, falling under Chapter Heading 2523.29 and 2523.90 of the Central Excise Tariff Act, 1985, (in short, "CETA"). DCBL, it appears, during the relevant period, was in the process of expanding its Cement Plant, located within the factory pr....
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....its own decision rendered in the matter of: Vandana Global Limited. Furthermore, reference was also made to the judgment of this Court in the case of: Saraswathi Sugar Mills V. Commissioner of Central Excise, Delhi 2011 (270) E.L.T. 465 (SC). 13.6. To be noted, while the demand for duty and interest was confirmed, the demand for penalty was set aside. 13.7. DCBL, being aggrieved, has preferred the captioned appeals. 14. The issues which arise for consideration in all the three (3) appeals, according to us, are common. 14.1. The first issue that requires consideration is: whether the structurals, cement, iron and steel, which are used in constructing foundations, would fall within the ambit and scope of Rule 2(a)(A)(iii), read with Rule 2(a)(A)(i) of the 2004 Rules. In other words, whether they could be treated as components, spares and/or accessories of the capital goods, referred to in Rule 2(a)(A)(i) of the 2004 Rules. In the alternative, it is submitted by both the Assessees, i.e., TAS and DCBL, that the said structurals, cement, and iron and steel, would fall within the definition of Rule 2(k), read with Explanation 2 of the 2004 Rules; which, therefore, is the othe....
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....dated 07.07.2009 would operate prospectively was sought to be established by Mr.Shankarraman, by referring to its contents. According to the learned counsel, a bare perusal of the said Notification would show that the amendment in Rule 2 (k) was brought into force from the date of its publication in the official gazette and not retrospectively. 16.5. In support of his submissions, learned counsel relied upon the following judgments: (i) CCE V. Rajasthan Spinning and Weaving Mills 2010 (255) ELT 481 SC (ii) CCE V. India Cements Ltd. 2012 (285) ELT 341 (Mad) (iii) CCE V. India Cements Ltd. 2014 (310) ELT 636 (Mad) (iv) CCE V. India Cements Ltd. 2014 (321) ELT 209 (Mad) (v) Dalmia Cements (Bharat) Ltd. V. CCE 2016 (341) ELT 102 (Mad) (vi) Thiru Arooran Sugars V. CCE 2015 TIOL 1734 -HC-Mad. (vii)Mundra Ports & Special Economic Zone Ltd. V. CCE & Cus 2015 (39) STR 726 (Guj.) 17. As against this, Ms.Hemalatha relied upon the orders of the Authorities below and, in particular, adopted the line of reasoning taken in the orders-in-original. 17.1. Learned counsel submitted that since, the structurals came within the ambit and scope of Chapter 72, they could not ....
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.... It was also sought to be contended by the learned counsel that, since, the amendment made vide the 2009 Notification was brought about in the explanatory part of Rule 2 (k), i.e., in Explanation 2, this would be yet another indicator that the amendment was retrospective in nature. 17.8. For this purpose, learned counsel relied upon the judgment of the Division Bench of the Karnataka High Court in the matter of: Deputy Commissioner of Commercial Taxes V. Bellary Steels & Alloys Ltd. [2008] 11 VST 361 (Karn). Furthermore, learned counsel contended that the decision applicable to the facts of this case was the judgment of the Supreme Court rendered in: Saraswathi Sugars V. Commissioner of Central Excise, Delhi 2011 (270) ELT 465 (SC). 17.9. Learned counsel further submitted that though this judgment was delivered in the context of Rule 57Q of the Central Excise Rules, 1944 (in short, the '1944 Rules'), the provisions being pari materia, the judgment rendered in the said case would be applicable to the instant matters as well. Reasons : 18. We have heard learned counsel for the parties and perused the record. 19. The facts in the three (3) appeals, are not in di....
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....se may be, on such capital goods, if such capital goods have been permitted to be cleared under rule 57S, subject to the provisions of this section and the conditions and restrictions as the Central Government may specify in this behalf: Provided that credit of specified duty in respect of any capital goods produced or manufactured - (a) in a free trade zone and used for the manufacture of final products in any other place in India; or (b) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or by a unit in Software Technology Parks and used for the manufacture of final products in any place in India, shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 (51 of 1975) equivalent to the duty of excise paid on such capital goods. Explanation - For the purposes of this section, - (1) "capital goods" means - (a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products; (b)....
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....ws credit of duty paid on capital goods used by the manufacturer of Specified goods. Capital goods eligible for credit have been defined in Explanation (1) annexed to Rule 57Q. Clause (a) to (c) of the said explanation cover specified capital goods falling under Chapter 82, 84, 85 and 90 and clause (d) covers components, spares and accessories of the said capital goods. 2. It has been brought to the notice of the Board that clause (d) of Explanation (1) is being interpreted by some of the field officers covering only such components, spares and accessories which would fall under Chapter shown under clauses (a) to (c) and credit is allowed only on those components, spares and accessories which are covered under the said chapters. 3. The matter has been examined. With effect from 23.7.1996, capital goods eligible for credit under rule 57Q have been specified either by their classification or by their description. Clause (a) to (c) of Explanation (1) of the said rule cover capital goods by their classification whereas clause (d) covers goods by their description viz. components, spares and accessories of the said capital goods. It may be noted that there is a separate entry for ....
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....ements Ltd., 2012 (285) E.L.T. 341 (Mad), was called upon to decide as to whether structural steel items, viz., Rebar Coils, CTD Bars, TOR Steel and, Cement used for civil construction activity, used as building material, could be treated as capital goods, eligible for credit, in terms of Rule 57Q. 23.1. The Division Bench, in the aforementioned case, applying the test laid out by the Supreme Court in: Commissioner of Central Excise V. Jawahar Mills Ltd., 2001 (132) ELT 3 and in Commissioner of Central Excise, Jaipur V. Rajasthan Spinning & Weaving Mills 2010 (255) ELT 481, held that the aforesaid items will fall within the scope and ambit of the definition of 'capital goods', set out in Rule 57Q. The observations made by the court in paragraph 7 and 8, being apposite, for the sake of convenience, are extracted hereafter: "7. As far as the Crane with accessories and Loader are concerned, there cannot be any difficulty in holding that they will come within the items of machinery or equipment used for production or processing of any goods for the manufacture of final products. As has been held by the Apex Court in Jawahar Mills Limited's case, the Rule makes it expl....
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....nd, while doing so, made the following observations: "10. As far as the reliance placed by the Revenue on the decision reported in 2011(270) E.L.T.465 (SC) (Saraswati Sugar Mills V. Commissioner of C.Ex., Delhi-III) is concerned, we do not think that the said decision would be of any assistance to the Revenue, considering the factual finding by the Tribunal therein in the decided case that the machineries purchased by the assessee were machineries themselves. Thus, after referring to the decision reported in 2010 (255) E.L.T.481 (Commissioner of Central Excise Jaipur V. Rajasthan Spinning & Weaving Mills Ltd.), the Apex Court held that in view of the findings rendered by the Tribunal that the machineries were complete and having regard to the meaning of the expression "components/parts", with reference to the particular industry in question, the Apex Court rejected the appeal filed by the assessee. 11. Thus going by the factual finding, which are distinguishable from the facts found by the Authorities below in the case on hand, we have no hesitation in rejecting the Revenue's appeal, thereby confirming the order of the Tribunal. 12. Learned standing counsel appearing f....
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....eatedly held that Saraswathi Sugar Mill's case is not applicable in coming to the conclusion whether or not structurals, cement, as also, iron and steel are capital goods, within the meaning of Rule 57Q or, even within the meaning of Rule 2(a)(A) of the 2004 Rules. 27. Similarly, in so far as TAS is concerned, in its own case, which is reported as: Thiru Arooran Sugars V. Customs, Excise and Service Tax Appellate Tribunal and another 2015-TIOL-1734-HC-Mad-Cx, a Division Bench of this Court, was, called upon to decide the following question of law: "Whether the order of the learned Tribunal inasmuch as it gives effect to the notification No.16/09 prior to 7.7.2009 overlooking the fact that the same is made expressly effective only from the aforesaid date?" 28. The Division Bench allowed the appeal and, set aside the order of the Tribunal. In effect, the Court held that the 2009 Notification would not come in the way of TAS, in that case, in claiming that the structurals, which were purchased and utilised for keeping in position the plant and machinery could be treated as inputs, within the meaning of Rule 2 (k) of the 2004 Rules, for the period prior to its issuance, i.....
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....tion 2 to include goods, which are used in the manufacture of capital goods, which, in turn, are used in the factory of the manufacturer. 31.3. In other words, any goods, which have any relationship with the manufacture of final products, whether directly or indirectly, irrespective of whether they are contained or not contained in the final product would be an 'input'. 31.4. Therefore, plant and machinery, which, even according to the Revenue, are capital goods, within the meaning of Rule 2(a)(A) of the 2004 Rules, as they fall in the Chapters referred to in sub-clause (i) of the very same Rule, would, in our view, take within its sway 'inputs', which come within the ambit and scope of Rule 2(k) read with Explanation 2; the only limiting condition being that these inputs should be used within the factory of the manufacturer. 31.5. Therefore, according to us, structurals, cement, as also, iron and steel, which are used to erect foundations, would come within the definition of 'input' as they form part of the capital goods, which, in turn, are used in the manufacture of final product. The manner in which the Revenue seeks to read the provisions of Ex....
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.... income. 32.3. In this behalf, the Court relied upon its earlier judgment rendered in the matter of: CIT (Central) Delhi, v. Harparsad & Co. P. Ltd. 1975 (99) ITR 118. 32.3. To our minds, this case, is completely distinguishable from the facts arising in the instant case. 33. Similarly, in Bellary Steels & Alloys case, the Division Bench of the Karnataka High Court was called upon to, broadly, examine the effect of a notification, issued by the Revenue, whereby, an earlier exemption notification dated 28.08.1993 was sought to be explained. The notification dated 28.08.1993, which was issued in exercise of power under Section 8 A of the Karnataka Sales Tax Act, 1957, exempted tax payable under the said Act, in respect of goods manufactured and sold by a new industrial unit, located in zones specified in column 3 of the said notification, albeit, for a particular period. The said notification also exempted tax payable under the said Act by an industrial unit making investment for expansion or diversification or modernisation on or after 12.07.1993, qua units located in the zone, once again, specified in column 3 of the very same notification. The notification carried two Exp....
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.... the Notification, points in the direction that it is neither clarificatory nor retrospective in its impact; a fact which is brought to fore upon a bare perusal of the same. The 2009 Notification in no uncertain terms states that it shall come into force from the date of its publication in the official gazette. Clearly, if, the intention was to clarify or give it retrospective effect, it would have been brought into force from a date anterior to the date of publication of the Notification. 35.1. For the sake of convenience, the relevant part of the Notification is extracted hereafter: ".....1. (1) These rules may be called the CENVAT Credit (Amendment) Rules, 2009. (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), in rule 2, in clause (k), in Explanation 2, after the words factory of the manufacturer, the following shall be inserted, namely:- but shall not include cement, angles, channels, Centrally Twisted Deform bar(CTD) or Thermo Mechanically Treated bar(TMT) and other items used for construction of factory shed, building or laying of foundation ....
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....Minister cannot control the meaning of the words used in the 2009 Notification. We have already indicated in our discussion above that the intrinsic evidence, points in the direction that the amendment was prospective in nature. Furthermore, the speech, to our minds, uses a generic expression "to clarify", which, when read with the first part, which states that it would have effect "immediately", only fortifies our view that the amendment was configured to operate from the date of it publication and not retrospectively. Therefore, the extracted speech, by itself, in our opinion, would not help the cause of the Revenue. 39. As indicated above, in Mundra's case, the Gujarat High Court made observations in this behalf, which being relevant, are extracted hereafter:. "8. Mr. Y.N Ravani, learned counsel for the revenue has placed reliance on the decision of the Larger Bench of the Tribunal in Vandana Global Limited v. Commissioner of Central Excise, Raipur, 2010 (253) E.L.T 440. We have carefully gone through the decision of the Larger Bench of the Tribunal. We do not find that amendment made in Cenvet Credit Rules 2004 which come into force on 7.7.2009 was clarificatory amend....
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....the powers conferred by sub- section (1) of Section 5A of the Central Excise Act, 1944... the Central Government being satisfied that it is necessary in the public interest so to do hereby exempts (i) capital goods as defined in Rule 57Q of the Central Excise Rules 1944 manufactured in a factory and used within the factory of production; (ii) ... from the whole of the duty of excise leviable thereon which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)." 41.1. The Court was, thus, clearly dealing with an exemption notification, and after applying a strict rule of construction, came to the conclusion that unless it is demonstrated that iron and steel structures, (which were claimed as component parts, within the meaning of sub-rule (5) of Rule 57Q), were essential in the manufacture of the sugar manufacturing unit or in the composition of the sugar manufacturing unit, they would not come within the ambit of the aforementioned exemption notification. 41.2. It is pertinent to note that during the course of argument, the Assessee had relied upon the 1996 circular, to which, we have made a reference above. The Supreme Court, as it clearly e....
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....me up for consideration was whether the claim of MODVAT credit by some manufacturers in respect of certain items by treating them as capital goods in terms of Rule 57Q was in order. Some of the items under consideration were power cables, capacitors, control panels, cable distribution boards, air compressors, etc. The Court examined the question in the light of the definition of capital goods given in Explanation to Rule 57Q, which read as follows: "capital goods" means-- (a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products; (b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and (c) moulds and dies, generating sets and weighbridges used in the factory of the manufacturer. 12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance....