Shree Cement LTD vs. Commissioner Of Central Exciseandser Tax

Held

The Court acknowledged the divergent views of the Tribunal and the subsequent pronouncements by various High Courts and the Supreme Court, which indicated that the issue was no longer res integra. The Court noted that a Larger Bench of the Tribunal, in the case of M/s. Manglam Cement Limited, had allowed the assessee's claim after a factual finding that the cement and steel were used for laying the foundation for the erection of 'Capital Goods'. The Court found no evidence that the Department had successfully challenged this Larger Bench decision. Therefore, the Court set aside the orders of the Tribunal and remitted the matter back to the Tribunal to decide the issue afresh, considering the specific usage of the cement and steel.

Facts

The appellant, Shree Cement Ltd., is engaged in the manufacturing of cement. It claimed CENVAT credit for cement and TOR steel used in the erection and fabrication of plant and machinery, asserting they qualified as capital goods or inputs. The appellant relied on Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004. The Customs, Excise & Service Tax Appellate Tribunal (Tribunal) had contradictory views on this issue, leading to appeals by both the department and the assessee. The Tribunal held that an amendment to Explanation 2 to Rule 2(k) in 2009 was clarificatory and retrospective. This view was subsequently reversed by the Chhattisgarh High Court in M/s. Vandana Global Ltd. and other High Courts, with the Supreme Court dismissing a Special Leave Petition in a related matter. The present appeal was admitted on substantial questions of law concerning whether cement and TOR steel qualified as 'inputs' and if the Tribunal erred in dismissing an appeal without considering submissions.

Key Issues

1. Whether cement and TOR steel used for the erection/installation of plant/machinery qualified as ‘inputs’ under Rule 2(k) of the CENVAT Credit Rules, 2004? The appellant argued that these materials were covered under the definition of 'Input' as per the unamended Explanation 2 to Rule 2(k). The revenue contended that the amendment to Explanation 2 to Rule 2(k) in 2009, which excluded cement and steel used for construction of factory sheds, buildings, foundations, or structures for supporting capital goods, was clarificatory and retrospective, thus disallowing the credit. The revenue also relied on decisions of various High Courts and the Supreme Court's dismissal of an SLP. 2. Whether the Tribunal was right in dismissing the appeal without considering the submissions made by the appellant? The appellant contended that the Tribunal failed to consider their arguments. The judgment does not record specific arguments from the revenue on this point.