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2017 (7) TMI 524 - MADRAS HIGH COURT

2017 (7) TMI 524 - MADRAS HIGH COURT - TMI - CENVAT credit - capital goods - componenets/spares/other accessories - scope of Rule 2(a)(A)(i) of the 2004 Rules - 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? - N/N. 16/09. - Held that: - structurals, cement, as also, iron and steel, which are used to erect foundations, would come within the def .....

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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. - MS structurals, which support the plant a .....

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e integral part of the capital goods is applied, the Assessees, in these cases, should get the benefit of Cenvat Credit, as they fall within the scope and ambit of both Rule 2(a)(A) and 2k of the 2004 Rules. - Appeal allowed - decided in favor of assessee. - Civil Miscellaneous Appeal Nos. 3814 of 2011 and 2695 and 2696 of 2012 - Dated:- 10-7-2017 - Rajiv Shakdher And R. Suresh Kumar, JJ. For the Appellants : Mr. J. Shankarraman for M/s.Mohammed Shaffiq For the Respondents : Ms. R. Hemalatha .....

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estored the Order-in-Original dated 18.08.2009, by following its own judgment, delivered by a Larger Bench, in the 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, an .....

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m 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 prior to 7.7.2009, overlooking the fact that the same is made expressly effective only from the aforesaid date? 2. Whether the order of the tribunal placing reliance on Vandana Global to .....

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t in CENTRAL EXCISE, JAIPUR vs. M/s.RAJASTHAN SPINNING & WEAVING MILLS LTD.? 4. Whether M.S.Angles, M.S.Joint and beams which are used for construction of foundation and supporting structure would qualify as Capital Goods?" 5. As would be evident from the above, the first question of law is common to all three (3) appeals. 5.1. In so far as the other questions of law are concerned, they arise for consideration, in all three appeals and, therefore, we would be passing a common order. 6. .....

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pellant in both C.M.A.Nos.2695 and 2696 of 2012, which is Dalmia Cements (Bharat) Limited, would be referred to as DCBL. 7. Briefly, the facts obtaining in each of these cases are set out hereafter. C.M.A.No.3814 of 2011: 7.1. TAS, apparently, at the relevant point in time, was in the business of manufacturing Sugar, Molasses, Rectified Spirit, Extra Neutral Alcohol, Ethanol, Denatured Ethyl Alcohol and Fusel oil. The first four products were non-excisable, while the last three are dutiable. 7.2 .....

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s, 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 .....

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alling in chapters referred to above nor, were they pollution control equipment. In addition thereto, it was alleged that the subject structurals could also not be considered as inputs for manufacture of capital goods. 7.6. In this regard, reference was made to Rule 2a (A) of the 2004 rules. Accordingly, TAS was asked to respond as to why ineligible Cenvat Credit, amounting to ₹ 1,01,929/-, should not be demanded from it under Section 11 A of the Central Excise Act (in short 1944 Act). 7.7 .....

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nnot function and hence they are fully integrated into the machinery; ii) Mere mention of the word structures does not mean Cenvat credit would not be admissible as such structures is part and parcel of the machinery itself. The items are not structural items used in civil constructions. The fact of usage of inputs is primary evidence in admissibility of Cenvat credit and in this regard, the stated materials fully justify the claim of eligible items for Cenvat. iii) The sugar boiling vessels, ju .....

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to non appreciation of ground level facts." 9. The Adjudicating Authority, after granting a personal hearing to the representative of the TAS, came to the conclusion, that the demand raised via the aforementioned show cause notice, had to be confirmed. An order, to that effect, 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 'Comm .....

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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 premises, situate in Da .....

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. To give effect to the aforesaid purpose, DCBL had to construct foundations which required use of cement and steel. Furthermore, DCBL also used MS Plates, MS Angles and MS Channels. Since, there were duty paid inputs, DCBL availed of Cenvat Credit, qua not only cement and steel, but also vis-a-vis the aforementioned structurals. 13.2. This was found fault with by the Revenue and, accordingly, six (6) show cause notices (SCNs) were issued for various purposes. The, broad, details of these SCNs a .....

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5/- 47,242/- 67,37,177/- 5 C.No.V/Ch37/15/47/2005-Cx Adj dt.08.04.2006 April 2005 to September 2005 82,58,701/- 82,083/- 83,40,784/- 6 C.No.V/Ch37/15/47/2005-Cx Adj dt.10.10.2006 October 2005 to April 2006 1,40,18,739/- 1,90,118/- 1,42,08,857/- 13.3. After giving due opportunity to file a reply and accord a personal hearing, the Adjudicating Authority, i.e., the Commissioner of Central Excise (in short Commissioner), vide two (2) separate orders of even date i.e., 04.09.2007, confirmed the deman .....

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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 Rul .....

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d, and in support of their arguments, both parties have relied upon Notification dated 16/2009, dated 07.07.2009, whereby, Explanation 2 to Rule 2(k) of the 2004 Rules stood amended. 15. In the context of the aforesaid issues, submissions were advanced on behalf of TAS and DCBL by Mr.J.Shankarraman, while on behalf of the Revenue, arguments were put forth by Ms.Hemalatha. 16. The submission of Mr.Shankarraman, in brief, was that, the structurals that were used to support the plant and machinery, .....

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the 2004 Rules. In other words, the submission was that, despite the fact that structurals fell within the ambit and scope of Chapter 72 would not, by itself, disentitle them from being treated as components and/or accessories of goods, falling in chapters 82,84,85,90 and heading No.68.05 and 68.04 of the first schedule to the CETA. 16.2. In support of this submission, learned counsel relied upon the contents of circular No.276/110/96-TRU, dated 02.12.1996. 16.3. Notably, this submission was als .....

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d steel were always understood as being embedded in the definition of inputas provided in Rule 2(k) of the 2004 Rules, is demonstrable by the fact that vide Notification dated 07.07.2009, an exclusion was sought to be made qua the aforementioned items, albeit, prospectively. That, Notification 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 s .....

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td. 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 be considered as components .....

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ot;input" provided in Rule 2 (k) was based on the user test principle enunciated in the case of CCE V. Rajasthan Spinning and Weaving Mills 2010 (255) ELT 481 SC. It was contended that Rajasthan Spinning and Weaving Mills' case, in turn, relied upon the judgment rendered in Commissioner of Central Excise, Coimbatore & Ors. V. Jawahar Mills Ltd. & Ors. 2001 (132) ELT 3 (S.C.). 17.3. In both cases, according to Ms.Hemalatha, the user test principle was applied in the facts and cir .....

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ry in nature and, therefore, by logical sequitur, retrospective, as was evident upon a bare perusal of the extract of the Finance Minister's speech, delivered in that behalf. 17.5. It was submitted that this aspect of the matter was appreciated by a Larger Bench of the Tribunal in the decision rendered in Vandana Global Limited case. 17.6. Learned counsel also contended that the Notification was merely declaratory of the intent of the Legislation and, therefore, should be treated as one whic .....

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ht 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 judgmen .....

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record. 19. The facts in the three (3) appeals, are not in dispute. All three matters pertain to a period, prior to 07.07.2009. Therefore, apart from the fact that we have been called upon to decide as to whether the 2009 Notification would have retrospective effect, we are also called upon to rule on as to whether or not structurals and cement, as also, iron and steel would fall within the scope and ambit of Rule 2(a)(A)(iii) and Rule 2 (k) of the 2004 Rules. Therefore, in order to decide upon .....

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pares and accessories of the goods specified at (i) and (ii); (iv) ...... (v) ...... (vi) ...... (vii) ...... 20. Pertinently, in the context of the argument advanced on behalf of the TAS and DCBL, which is that, in order to come within the ambit of the word, 'component or accessory', the structurals, Cement, as also Iron and Steel, need not fall within the same chapter, as the capital goods, one would have to look at the clarificatory circular dated 02.12.1996 (in short, the 1996 circul .....

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Q. Applicability - (1) The provisions of this section shall apply to finished excisable goods of the description specified in the Annexure below (hereinafter referred to as the "final products") for the purpose of allowing credit of specified duty paid on the capital goods used by the manufacturer in his factory and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, or as the case may be, on such capital goods, if such capital goods ha .....

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nit 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 p .....

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actory of the manufacturer - (i) all goods falling under heading Nos.84.02, 84.05, 84.06, 84.11, 84.12, 84.16, 84.17, 84.19, 84.23, 84.25 to 84.28, 84.80, 85.05, 83.35, 90.11, 90.12, 90.13, 90.16, 90.17 and 90.24 to 90.31; (ii) auxiliary plants falling under heading No.84.04 for use with boilers of heading No.84.02; (iii) I.C. engines (other than engines of motor vehicle) falling under heading No.84.07 or 84.08; (iv) compressors (other than of a kind used for refrigerating and air conditioning a .....

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tem (i) to (viii) above; (x) refractories falling within Chapter 69; (e) goods specified in the Table in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.68/89-Customs, dated the 1st March, 1989, and used in the factory of manufacturer. (2) "specified duty" means duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975). (2) Notwithstanding anything contained in the sub-rule (1), no credit of the .....

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dit 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 office .....

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r 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 components, spares and accessories and no reference has been made about their classification. As such, scope of this entry is not restricted only to the components, spares and accessories falling under Chapters 82, 84, 85 or 90 but covers all components, spares and accessories of the specified goods irrespectiv .....

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ow that the Revenue in the context of Rule 57Q was of the view that certain capital goods were made eligible for grant of Modvat Credit, based on classification, while components and spares of such capital goods were granted the same benefit based on description. For capital goods to be eligible for Modvat Credit, they had to fall within the ambit of the Chapters indicated in the Rule. This was so, as their eligibility to avail Modvat Credit was based on classification. In so far as components, .....

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004 Rules on a parity of reasoning, cannot be accepted. According to us, as long as the components, spares and accessories, pertain to capital goods falling in Rule 2(a)(A)(i), i.e., Chapter 82,84,85,90 and Heading No.68.05 and 68.04 of the first schedule to CETA, they would have to be treated as capital goods and would, hence, be eligible for Cenvat credit. 23. Besides the aforesaid, let us advert to the view taken in various judgements on this very issue from time to time. A Division Bench of .....

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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, ther .....

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ration. As far as the other items, namely, Rebar Coils, CTD Bars, TOR Steel and Cement are concerned, as to whether they are capital goods or not, the Tribunal having regard to the law laid down by the Apex Court in Jawahar Mills's case, has liberally construed the above Rule and factually found that these are the items, which are used for the purpose of construction of the plant comprising of concrete foundations, concrete silos for storing raw materials, clinker and cement, pre-heater towe .....

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ragraphs 12 and 13, while applying the "user test" and following the Jawahar Mills's case, the Apex court has held that even though steel plates and M.S.Channels used in the fabrication of chimney would fall within the ambit of "capital goods". (Emphasis is ours) 24. A similar question came up for consideration, once again, in another case, i.e., CCE, Tiruchirapalli V. India Cements Ltd. 2014 (305) ELT 558 (Mad.). In this matter, a Division Bench of this Court was called .....

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V. Commissioner of Central Excise, Delhi 2011 (270) E.L.T. 465 (SC). and, instead, relied upon the judgment of the Supreme Court in CCE V. Rajasthan Spinning and Weaving Mills 2010 (255) ELT 481 SC and, 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 .....

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ents/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 for the Revenue pointed out that the Tribunal had merely passed a cryptic order by referrin .....

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tly, C.M.P. No.16107 of 2005 is also dismissed. (Emphasis is ours) 25. To be noted, cases pertaining to the very same Assessee, i.e., India Cement Ltd., came up for hearing in this Court on two other occasions. The decisions rendered were reported as follows: (i) CCE V. India Cements Ltd. 2014 (310) ELT 636 (Mad) (ii) India Cements Ltd. V. CESTAT, Chennai 2015 (321) ELT 209 (Mad.) 25.1. The case, which is reported as: CCE V. India Cements Ltd., 2014 (310) ELT 636 (Mad), required the Court to dec .....

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facts and circumstances of the case, the Appellate Tribunal was justified in denying cenvat credit on MS Rod Sheets, M.S.Chennel, M.S.Plates, Flats etc. used in the fabrication of fly ash hooper, fly ash bin, fly ash handling system & kiln brick laying work to bold refractories? and 2. Whether the decision of the Larger Bench in M/s.Vandana Global Ltd. and others vs. Commissioner of Central Excise, 2010 (253) ELT 440 (LB) can be said to have laid the correct principle of law and whether the .....

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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 th .....

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ce, i.e., 07.07.2009. 29. Therefore, besides anything else, what clearly comes to fore is that the various Division Bench of this Court have consistently ruled in favour of different Assessees in holding that structurals, which are used to keep in position plant and machinery and, cement, as also, iron and steel, which are used to erect foundations, which, in turn, hold the plant and machinery could, not only be treated as 'capital goods', but could also be treated as 'inputs'. 2 .....

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f the 2004 Rules, having already dealt with the argument advanced by the learned counsel for the Revenue qua Rule 2(a)(A)(iii) of the 2004 Rules. 31. A close reading of the definition of 'input' in Rule 2k(i) would show that it includes all goods (except light diesel oil, high speed diesel oil and motor spirit, which are commonly known as petrol), which are used in or "in relation to manufacture of final products", (whether directly or indirectly, whether contained in the final .....

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is relationship could be either direct or indirect without being weighed down by the fact that they are not included in the final product. Their inclusion or exclusion from the final product, evidently, is not material, as long as the said exercise takes place within factory precincts, used for the purposes of production. 31.2. The scope of the word 'input' has been further clarified in Explanation 2 to include goods, which are used in the manufacture of capital goods, which, in turn, ar .....

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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 .....

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ehalf of the TAS and DCBL, the Notification does not indicate that it is either declaratory or retrospective. 32. Ms.Hemalatha, as noticed by us above, relied upon two (2) judgments, to contend that the amendment to Explanation 2 to Rule 2(k) should be read as clarificatory. The first judgment, relied upon by the learned counsel, has been rendered in the matter of : Commissioner of Income Tax V. Gold Coin Health Food Pvt. Limited (2008) 304 ITR 308 (SC). The second judgment is that of the Divisi .....

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claratory and hence, retrospective in nature, by relying upon the overarching definition of the term "income", provided in Section 2(24) of the very same Act. The point at issue before the Court was whether the decision rendered by it in an earlier case, that is in: Virtual Soft Systems Ltd. V. Commissioner of Income Tax, Delhi 2007 (9) SCC 665, was correct. 32.2. In Virtual Soft System's case, the Supreme Court had come to the conclusion that no penalty could be levied, if, the re .....

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e profit or "minus 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 .....

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t 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 Explanations i.e., Explanation (I) and Explanation (II). While Explanation (I) defined the meaning of the expression "tiny industrial unit", "small-scale Industrial Unit", "medium Scale industrial unit" or "large scale industrial unit" and & .....

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f such investment." 33.1. The amended clause (iii) elaborated on the method of quantification of tax exemption. Because the unamended clause (iii), which appeared in the earlier notification, was vague, the Assessing Authorities were adopting their own method, while granting relief. It is, in this background, the State Government took upon itself to issue the subsequent notification dated 11.10.1995 in order to provide a method for quantifying tax exemption qua industrial units undertaking .....

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larificatory in nature. 34. As would be obvious, this judgment will also have no application, in view of the fact that while in in the instant case, the benefit is taken away by excluding structurals, cement also iron and steel etc. from the meaning ascribed to the term "input" in Rule 2(k), by amending Explanation 2, in Bellary Steels & Alloys case, the circumstance with which the Court was confronted, were quite different. 35. A bare reading of the 2009 Notification reveals that .....

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y, 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 re .....

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. (Emphasis is ours) 36. A plain reading of the relevant parts of the Notification, which have been emphasised by us, would bring forth the point which we have sought to articulate herein above, that is, intrinsic evidence points in the direction that the notification is not retrospective. 36.1. If, that be the conclusion, certainly, the submission advanced on behalf of TAS and DCBL has weight, which is that the Revenue, with effect from 07.07.2009, has sought to, in a sense, nullify the impact .....

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Global Limited that the 2009 Notification would have retrospective effect. Pertinently, the Tribunal in Vandana Global Limited, has based its view on the speech made by the, then, Finance Minister. As a matter of fact, that part of the speech of the Finance Minister, which dealt with the amendment, was also relied upon by Ms.Hemalatha. For the sake of convenience, the said part is extracted hereafter: "H.Amendments in Central Excise Rules and Cenvat Credit Rules. These changes to come into .....

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bout in Rule 2(k) were sought to be enforced immediately. Second, the amendment sought to clarify that 'inputs' will not include structurals, cement and other items referred to therein. In our view, first and foremost, the speech of the Finance 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 s .....

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f, 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 amendment as there is nothing to .....

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ibunal is based on conjectures and surmises as the Larger Bench of the Tribunal used the expression that intention behind amendment was to clarify. The coverage under the input from where this intention has been gathered by the Tribunal has not been mentioned in the judgment. There is no material to support that there was any legislative intent to clarify any existing provision. For the same reason, as mentioned above, the decision of the Apex Court in Sangam Spinners Limited v. Union of India, .....

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pon to decide as to whether, iron and steel, and structurals set up by the Assessee, which were used captively in the factory for installation of a sugar manufacturing plant could be classified as capital goods under Rule 57Q of the 1944 Rules, in order to enable the Assessee to claim benefit from excise duty under Notification dated 67/95-CE, dated 16.3.1995. The Notification provided for exemption from whole of excise duty qua those capital goods, which were defined in Rule 57Q of the 1944 Rul .....

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ed 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 .....

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have made a reference above. The Supreme Court, as it clearly emerges upon a perusal of para 22 of the judgment, indicated that since, the circular was not produced before the Tribunal, it was justified in reaching a conclusion, which went against the interest of the Assessee, in that case. The Court, however, concluded by saying that since, they had ruled that the iron and steel structures were not components of machinery used in the installation of sugar manufacturing plant, the observation m .....

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ssessee in that case could avail of Modvat Credit in respect of steel plates and MS channels, i.e., structurals used in the fabrication of chimney, which, in turn, was used, as it appears, in the operation of the diesel generating set. The Court, while, appreciating the contours of Rule 57Q, made the following pertinent observations: "9. The language of Rule 57Q is clear and unambiguous. It applies to the final products described in column (3) of the Table under the Rule as also to other go .....

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round the question whether the steel plates and M.S. channels used in the fabrication of chimney would fall within the purview of serial No.5 of the Table below Rule 57Q. 10. Having examined the question in the light of the language employed in Rule 57Q and the case law on the point, we are of the opinion that the appeal is devoid of any merit. 11. In Jawahar Mills Ltd. (supra), heavily relied upon by the learned counsel for the assessee, the question which came up for consideration was whether .....

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us, 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, equi .....

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t particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of "capital goods" would depend upon the user it is put to. 13. Applying the "user test" on the facts in hand, we have no hesitation in holding that the st .....

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t gases. Therefore, any equipment used for the said purpose has to be treated as a accessory in items of Serial No.5 of the goods described in column (2) of the Table below Rule 57Q. 14. We are, therefore, of the opinion that the Tribunal was correct in law in holding that the assessee was entitled to avail of modvat credit in respect of the subject items viz. steel plates and M.S. Channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods .....

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pital goods. The Court, went on to further hold that such equipment had to be treated as an accessory. As a matter of fact, in Saraswathi Sugar Mills case, the Court, while noticing the view taken in Rajasthan Spinning and Weaving Mills Limited said that as long as it could be shown that the item in issue was an integral part of the machinery, i.e., capital goods, it would fall in the definition of 'component' and thus, by logical extension, come within the ambit of 'capital goods .....

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