Huge win for Revenue - Goods like cement and steel items used for laying 'foundation' and for building 'supporting structures' cannot be treated either as inputs for capital goods: CESTAT LB
IT was a battery of top lawyers of the country pitted against the solitary JCDR and the David has won hands down against all the Goliaths. The Larger Bench of the Tribunal headed by the President emphatically ruled in favour of Revenue that: Goods like cement and steel items used for laying 'foundation' and for building 'supporting structures' cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules.
The Explanation 2 to Rule 2(k) of the CENVAT Credit Rules. 2004 was amended by Notification No. dated 7.7.2009 and after the amendment it reads as under:-
"Explanation 2:- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacture 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"
The Larger Bench of the Tribunal held that the clarificatory amendment made to Explanation 2 to Rule 2(k) in 2009 is applicable retrospectively.
In TIOL-DDT 1133 16.06.2009 we noted,
If CBEC and the officers in its field formations understand the concept that CENVAT Credit is allowed to avoid the cascading effect of taxation, such issues would never be discussed. What is wrong in allowing credit on the structures? Why can't the Board be a little benevolent and think of ways to help the assessees who work hard so that our bureaucrats can be paid a decent salary?
The Hon'ble Tribunal cannot be faulted for interpreting the law as it stands in the statute, but should the government be so petty about allowing a little credit?
Certainly this is not the end of the story – the matter will be taken up before higher forums and if the government is determined to stand on its egoistical view, there will be a retrospective amendment in future!
We bring you this landmark order of the Larger Bench of CESTAT delivered just five days ago – yet another first from TIOL.