Vandana Global – Appeal Admitted by Chattisgarh HC
IN the famous Vandana Global case - 2010-TIOL-624-CESTAT-DEL-LB, the Larger Bench of the CESTAT held,
(a) The term "capital goods" has been defined in the CENVAT Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said Section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, 'capital goods' defined in the CENVAT Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of the decisions of the Hon'ble Supreme Court on the issue, which is no longer res integra.
(b) 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 for the impugned period.
There were more than 20 appellants in this case. While reporting this case, we commented,
"But is it the end of road for assessees?
Not necessarily, because the nexus test laid down by the Apex Court in Maruti Suzuki Ltd case appears to have been twisted by the Larger Bench to reject CENVAT credit on the impugned goods because the Supreme Court in that case was dealing with the limited issue of eligibility of input credit on inputs used in generation of electricity in a captive power plant and cleared to joint ventures, power grid etc for a price, apart from captively consuming the same for their manufacturing activity.
After all without a civil structure or foundation and/or a structural support, plant and machinery can never be installed in a factory and without proper installation of plant and machinery how can they function (remember the functional test) and produce/manufacture final products. Probably, a field visit by members of the Larger Bench perhaps to a large cement plant (which has huge conveyor belts to transfer coal, iron pellets, and clinker etc to rotary kilns) would have resulted in a better understanding of the various tests laid down by the Apex Court .
So in all probability this issue is bound to reach the highest temple of justice viz., the Apex Court. Watch this space"
The Bilaspur Bench of the Chattisgarh has admitted an appeal against this order. This is certainly going to be a long-standing litigation.