CESTAT erred in granting Cenvat Credit on Boiler Structure on the basis of CBEC Circular-High Court
ABCAUS Case Law Citation:
ABCAUS 2208 (2018) (02) HC
The Commissioner Central Excise (Revenue) had filed an appeal under Section 35-G of Central Excise Act, 1944 read with Section 174 of Central Goods & Services Tax Act, 2017 challenging the order passed by the Customs Excise & Service Tax Appellate Tribunal (CESTAT/Tribunal) allowing the Cenvat credit to the respondent assessee.
The respondent assessee was a Sugar Mill which availed Cenvat credit on capital goods like Boiler Structure, Structure for C/F Machine, Fixture Holder, Structure Granting etc.
On being pointed out, the respondent reversed the whole amount of credit. However, the assessee again requested to the Divisional Assistant Commissioner for granting permission for re-crediting the above amount but the same was turned down by the Assistant Commissioner. However, the respondent assessee informed the Range Superintendent that they had taken re-credit.
Therefore, the assessee was served with a Show Cause Notice pointing out that the goods on which appellant took Cenvat credit were structural items falling under Tariff Item No. 73089010 & 73090090 and therefore, they were not eligible for Cenvat credit. The Show Cause Notice was adjudicated and Cenvat Credit was disallowed and equal penal penalty was imposed.
The assessee preferred appeal before Commissioner (Appeals) who upheld the Order. Aggrieved, the respondent assessee filed an appeal before the Custom, Excise & Service Tax Appellate Tribunal (CESTAT/Tribunal)
Before the Tribunal, the assessee contended that CBEC. Circular No. 964/07/2012-CX dated 02.04.2012 has clarified that the structural components which are to be used essentially as a part of boiler system could be classified as part of boiler only under Heading 8402 of the Tariff and submitted that the capital goods on which Cenvat credit was denied were either structural components of boiler system or the goods which were used as inputs for making capital goods like Storage Tank and therefore, Cenvat credit was admissible to them in view of said circular and as provided under Rule 2(k) of Cenvat Credit Rules, 2004.
The Tribunal, in view of the definition of inputs during the relevant period that inputs used for making capital goods within the factory were eligible for the purpose of Cenvat credit and in view of the said CBEC Circular held that the Cenvat credit was admissible to the appellant.
Aggrieved by the order of the Tribunal the Revenue was before the High Court.
The appeal was admitted by the Hon’ble High Court on the following questions of law:-
(1) Whether the Customs Excise & Service Tax Appellate Tribunal, Allahabad is correct in setting aside the order in original dated 12.11.2010 and the order in appeal dated 29.09.2011 on the basis of Circular No.964/07/2012-CX dated 02.04.2012.?
(2) Whether the Customs Excise & Service Tax Appellate Tribunal, Allahabad is correct in ignoring the Circular No.966/09/2012-CX.1 dated 18.05.2012?
The contention of the appellant Revenue was that the Tribunal had erred in setting aside the order of the appellate authority relying upon the CBEC Circular and also omitting to record any finding so as to upset the finding of the adjudicating authority made in his order in original that the item claimed as inputs are Boiler structure, Structure for C/F Machine, Fixture Holder, Structure Granting etc., they fall under Chapter 72 & 73, which have been used in the structural and supporting structure of the sugar machinery, erected, fabricated and installed/ embedded to earth as immovable property, which is outside the purview of Central Excise Tarrif and thus non-dutiable, therefore, the Cenvat Credit was not admissible on the impugned items and the duty paid thereon is not reimbursable in the light of Rule 6 read with Rule 2 (a), 2 (k) and 2 (h) of the Central Excise Act, 1944.
Also, the Tribunal ignored the subsequent circular of the CBEC which in para 4 clarified as under;
“As clearly stated in para 3 of Boards’ above circular dated 2.4.2012, it is once again reiterated that in terms of the Rule 2(k) of the CENVAT Credit Rules, 2004, while CENVAT Credit is available in respect of parts of Boiler, the same is not admissible in respect of the structural components used for laying of foundation or making of structures for support of capital goods/ Boiler. The above clarification is in conformity with the views expressed in the judgments of the Hon’ble Supreme Court/ different benches of the CESTAT.”
On being confronted with the above, the respondent could not satisfy the Hon’ble Court.
The Hon’ble High Court held that the Tribunal had erred on the aforesaid count. The Hon’ble High Court opined held the adjudicating authority order could not have been set aside by the Tribunal without dealing with and setting aside the findings and reasoning given by him in support of his order.
Accordingly, the impugned judgment of the Tribunal was quashed and remitted back for fresh consideration.