CX - CENVAT credit taken on cement, angles, channels, CTD & TMT bars for construction of factory shed, building - appellant could not have held a bonafide belief of entitlement after amendment to rule 2(k) of CCR: CESTAT
By TIOL News Service
MUMBAI, JUNE 13, 2018: THE appeal filed by the assessee was dismissed by the CESTAT by order dated 12.09.2017.
We had reported this order 2018-TIOL-833-CESTAT-MUM as -
CX - CENVAT - Items used for fabrication of supporting structure cannot be allowed - Moreover with effect from 07.07.2009 the definition of 'input' appearing in Rule 2(k) of the CCR, 2004 has been amended and it specifically excludes 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 or making of structures for support of capital goods from the ambit of definition of inputs - CENVAT credit rightly denied - No merit in appeal, hence dismissed: CESTAT [para 6, 7]
An application for rectification of mistake in this order has been filed by the appellant.
It is pointed out that on the date of hearing they were not present and hence could not bring to the notice of the Bench that in their own case, this Tribunal had vide Order no. A/772/C-IV/WZB/2006 dated 09/01/2006 allowed the benefit of CENVAT credit on similar items. Furthermore, no findings on limitation have been given in the impugned order.
The AR pointed out that Explanation 2 in rule 2(k) of CCR was amended on 07/07/2009; the portion shown below in red was added by the amending notification 16/2009-CX(NT) -
"Explanation 2: Input include goods used in the manufacture of capital goods which are further used in the factory of manufacturer 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 or making of structures for support of capital goods."
It is argued that there was no doubt regarding inadmissibility of said credit after 07/07/2009 and the appellant continuing to take credit even after 07/07/2009 indicated their intention to evade duty.
The Bench considered the submissions and observed -
"4. … I find that the impugned order relies on the decision of the Hon'ble Apex Court in the case of Saraswati Sugar Mills - 2011-TIOL-73-SC-CX. It is seen that the order dated 09/01/2006 in appellant's own case has been passed without considering the decision of the Hon'ble Apex Court in the case of Saraswati Sugar Mills (supra) and, therefore, the same cannot be treated as valid precedence. However, for the purpose of limitation, the appellant could have held a bonafide belief in view of the Tribunal's order in their own case dated 09/01/2006. The said bonafide belief could not have continued after rule 2(k) of CENVAT Credit Rules, 2004 was amended on 07/07/2009 when such goods were specifically excluded from the definition of the capital goods."
The impugned order was modified and paragraph 8 of the same was substituted accordingly.
The Bench concluded that the demand for the period up to 07/07/2009 is required to be set aside and the demand for the period after 07/07/2009 was upheld and the penalty was modified accordingly.
Inasmuch as the Appeal was partially allowed.
The ROM application was allowed in above terms.
In passing: The Apex Court decision (supra) is dated 2 nd August 2011, much later in time to the Tribunal decision passed on 09/01/2006 in appellant's own case.
(See 2018-TIOL-1820-CESTAT-MUM)
