M/S Godawari Power And Ispat Limited vs. Commissioner Of Customs And Central Excise

Held

The High Court held in favor of the Assessees and against the Revenue on all formulated substantial questions of law. Regarding the first two issues, the Court agreed with the ratio of the Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. and the Madras High Court in M/s. Thiruarooran Sugars, which had considered similar amendments and their effect. The Court found that the amendment to the CENVAT Credit Rules, 2004, effective from July 7, 2009, was not clarificatory but a new amendment, and therefore, it could only operate prospectively. Consequently, the denial of CENVAT credit for goods like cement and steel items used for foundations and supporting structures, and for materials used in fabricating structures embedded in the earth, was set aside for the impugned period. The appeals filed by the Assessees were allowed, and the appeals filed by the Revenue were dismissed. No order as to costs was made.

Facts

This judgment consolidates multiple tax appeals and writ petitions concerning the CENVAT Credit Rules, 2004, and the definition of 'capital goods' and 'inputs' under the Central Excise Act, 1944. The core dispute revolves around whether goods like angles, joists, beams, channels, bars, and flats used in fabricating structures embedded in the earth, and the structures themselves, qualify for CENVAT credit. The Tribunal, in an earlier order, had referred these issues to a Larger Bench. The impugned order of the Tribunal held that such goods used for foundations and supporting structures cannot be treated as inputs for capital goods or in relation to final products, thus disallowing credit. The appeals challenge this decision.

Key Issues

1. Whether the term 'capital goods' excludes structures embedded in the earth, as per the CENVAT Credit Rules, 2004, and the Central Excise Act, 1944? The petitioner/appellant argued that structures embedded in the earth should be considered capital goods, and the materials used for their fabrication should be treated as inputs for capital goods or in relation to final products, thus eligible for CENVAT credit. The revenue contended that such structures are not excisable goods and therefore cannot be capital goods, and the materials used are not inputs for capital goods or final products. 2. Whether goods like angles, joists, beams, bars, and plates, which are used in the fabrication of structures embedded in the earth and plant, are to be treated as 'input' used in relation to their final products or as inputs for capital goods? The petitioner/appellant argued for their classification as inputs eligible for credit. The revenue argued against this classification. 3. Is the amendment brought into the CENVAT Credit Rules, 2004, as per Rule 2 of the CENVAT (Amendment) Rules, 2009, retrospective in nature, and clarificatory, to be applied to matters arising before its commencement? The petitioner/appellant likely argued for its retrospective and clarificatory nature to support their claim for credit for the impugned period. The revenue likely argued that the amendment is prospective.