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Commissioner of Central Excise Jaipur II V/S Simplex Infrastructure Ltd.

    Service Tax Appeal No. 59497 of 2013 [Arising out of the Order-in-Original No. 19/2013/ST/JPR-II-Commr dated 19.06.2013, passed by Commissioner of Central Excise, Jaipur II] and Final Order No. 52470/2018

    Decided On, 10 July 2018

    At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi

    By, MEMBER

    For Petitioner: Amresh Jain, AR And For Respondents: B.L. Narasimhan and Rachit Jain, Advocates

Judgment Text

1. The brief facts of the matter are that the respondent-assessee is registered with the department as a Service Tax assessee under the category of 'Commercial and Industrial Construction services' and 'supply of tangible goods services'. The respondent-assessee has entered into an agreement with M/s. Aditya Cement, Chittorgarh for construction of Cement plant as well as for laying down the foundation of capital goods which are to be used in the factory. As per the agreement between the service provider and the service recipient, some raw material such as cement reinforcement, industrial, MS angles, TNT bars etc. were to be supplied by the service recipient namely, M/s. Aditya Cement for construction and laying down of foundation stone for these machines in the factory. The assessee included the value of free supply materials in the assessable value for computing the value of services for payment of Service Tax and as also not claimed any abatement of the portion of the material used for providing output service namely, commercial and industrial services. It has been the contention of the department that the respondent assessee has wrongly availed the Cenvat Credit of Rs. 20,68,89,323/- in respect of cement, MS Plates, MS angles, MS channels, CTD/TMT bars, MS beams, MS shapes and sections, G C Sheet etc. claiming them as inputs for the period from January, 2007 to March, 2010 which, of course were used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods, stating that Rule 2(k) of Cenvat Credit Rules, 2004 read with Rule 3(1) of Cenvat Credit Rules, 2004 does not allow cenvat credit of such materials. The department has also invoked the penal provisions under Rule 15 of Cenvat Credit Rules, 2004 read with Section 76 and 78 of the Finance Act, 1994.

2. The Show cause notice dated 19.4.2012 came to be adjudicated by the learned Commissioner who vide his order dated 20.6.2013 held that an amendment to Rule 2(k) of Cenvat Credit Rules, 2004 was inserted vide Notification No. 16/2009 dated 7.7.2009 wherein the above mentioned raw materials such as Cement, angles, channels CTD/TMT bars and other items used for construction of factory shed, building or laying down of foundation for making of structures for support of capital goods have been excluded from the scope of inputs vide above mentioned Notification No. 16/2009 CE (NT) dated 7.7.2009. Since the demand for reversal of the Cenvat Credit was for the period from March, 2007 to April, 2010, and as the amendment to the definition of inputs under Rule 2(k) of Cenvat Credit Rules, 2004 has come into effect from 7.7.2009, the learned Commissioner was of the view that since the amendment to the Cenvat Credit Rules, 2004 has been issued under Section 37 of the Central Excise Act, 1944, and therefore, it is prospective in nature and applicability of the same cannot be made retrospectively. Accordingly, the learned Commissioner had allowed the cenvat credit of Rs. 20,64,32,43/- to the assessee which was taken during the period from January, 2007 to 6.7.2009 and the balance Cenvat credit of Rs. 4,56,880/- was disallowed and equal amount of penalty was also imposed under Rule 14 of Central Excise Rules read with Section 78 of the Finance Act, 1994.

3. Department feeling aggrieved with the above order is before us challenging the Order-in-Original dated 20.6.2013 of the learned Commissioner.

4. The basic premise on which the Commissioner's order has been reviewed and the Revenue has filed this appeal is that the amendment inserted to Rule 2(k) to Cenvat Credit Rule, 2004 is retrospective effective as same is only clarificatory in nature. The issue before the Larger Bench of this Tribunal in the case of M/s. Vandana Global Ltd. v. CCE, Raipur: 2010 (253) SLT 440 (Tri-LB)] for sometime wherein this Tribunal while discussing the retrospective applicability of the amendment to Rule 2(k) of CCR, 2004 has noted that explanatory memorandum to Finance Bill, 2009 stated that purpose of the amendment is clarificatory in nature and the same was also reiterated by Budget Bulletin and other departmental clarifications. This Tribunal observed that intention behind amendment to Rule 2(k) of CCR, 2004, is merely clarificatory and there is no indication that the amendment has been made to change the scope of Cenvat Credit Rules, 2004, As this Tribunal has held that since the amendment is only clarificatory, which has retrospective applicability. Making this as a ground for reviewing the above mentioned order, the department had argued that the Commissioner should not have allowed the Cenvat Credit taken by the respondent-assessee on the goods used in the construction of factory shed and in laying down the foundation of various capital goods.

5. We have heard both the sides and also perused the relevant papers of the appeal.

6. The learned advocate appearing for the respondent-assessee has mentioned that the matter is no longer res integra as it has been held by various High Courts and this Tribunal that the amendment of Rule 2(k) with effect from 7.7.2009 was prospective in nature and same cannot be made retrospective and therefore, order-in-original passed by the learned Commissioner is absolutely legal and as per the provisions of Cenvat Credit Rules. Learned Advocate has relied on various judgements especially the order issued by Hon'ble High Court of Gujarat in the case of Mundra Ports & Special Economic Zone Ltd. v. CCE & Cus : 2015 (39) STR 726 (Guj)]. The relevant extract of the above judgment of Hon'ble Gujarat High Court is reproduced below:

"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 Cenvat Credit Rules, 2004 which come into force on 7-7-2009 was clarificatory amendment as there is nothing to suggest in the Amending Act that amendment made in Explanation 2 was clarificatory in nature. Wherever the Legislature wants to clarify the provision, it clearly mentions intention in the notification itself and seeks to clarify existing provision. Even, if the new provision is added then it will be new amendment and cannot be treated to be clarification of particular thing or goods and/or input and as such, the amendment could operate only prospectively. In our opinion, the view taken by the Tribunal 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 and Others, reported in : (2011) 11 SCC 408 : 2011 (266) E.L.T. 145 (S.C.) would not be applicable to the facts of the instant case."
7. Learned Advocate has also cited the decision of this Tribunal in the case of M/s. Singhal Enterprises Pvt. Ltd. v. CC& CE, Raipur : 2016 (341) ELT 372 (Tri-Del)] which has also been endorsed by Hon'ble High Court of Chhattisgarh. Relevant extract of the judgment are also being reproduced hereinbelow:

"15. We find that the controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd : 2010 (255) E.L.T. 481 (S.C.), wherein the Hon'ble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the "user test" evolved by the Apex Court in the case of CCE, Coimbatore v. Jawahar Mills Ltd.: 2001 (132) E.L.T. 3 (S.C.), which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the "user test" to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace, etc. cannot be suspended in mid-air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon

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for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of 'Capital Goods' includes, components, spares and accessories of such capital goods. Accordingly, applying the "User Test" to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of 'Capital Goods' as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit." 8. In the above mentioned orders/judgements it is categorically been provided that amendment to Rule 2(k) vide Notification No. 16/2009 dated 7.7.2009 is only prospective and same cannot be made retrospective as held by various High Courts as well as by this Tribunal in the judgments mentioned above. 9. In view of the above facts, we find no merit in the appeal filed by the department and same is dismissed.