The Commissioner of Central Excise vs India Cements Ltd. and Others

R. Sudhakar, J.—Aggrieved by the order of the Appellate Tribunal in dismissing the appeal filed by it, the Revenue is before this Court challenging the said order by filing the present appeal. This Court, vide order dated 22.10.2010, framed the following substantial questions of law for consideration:-

"1) Whether the Hon''ble Tribunal is correct in holding that Notification No. 25/96-C.E. (N.T.) dated 31.08.1996 was retrospective and consequently treating the goods specified under 84.74 (which was specifically excluded from the eligible list of specified goods) as eligible capital goods during the period between 23.07.1996 and 31.08.1996?

2) Whether the Hon''ble Tribunal is correct in treating the Notification No. 25/96-C.E. (N.T.) dated 31.08.1996 as clarificatory, when there is no express or by a necessary implication made to have retrospective operation of the same?

3) Whether the Hon''ble Tribunal is correct in not resorting to literal rule of interpretation when the scope of capital goods was very clear and unambiguous leaving no chance for any other interpretation?"

When the matter was taken up for hearing, learned counsel appearing on either side fairly submitted that the issues covered in this appeal are squarely covered by a judgment of this Court in the respondent/assessee''s own case in India Cements Ltd. Vs. Commissioner of Central Excise, , wherein this Court has answered the issue against the Revenue.

A Division Bench of this Court, considering similar issue in the case of the very same assessee in the abovesaid case, has held as under :-

"12. The assessee also placed reliance on the decision reported in Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd., , wherein, the Apex Court, applying "user test" evolved in the judgment in Jawahar Mills'' case, held that items used in the fabrication of chimney would fall within the ambit of "capital goods" and that the assessee was entitled to avail modvat credit in respect of the disputed items under Rule 57Q. In fact, the said decision was followed by this Court in respect of the assessee''s own case on earlier occasion in C.M.A. No.3101/05 by order dated 13.12.2012. Having accepted the case of the assessee by applying the Apex Court decision reported in Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd., , this Court rejected the Revenue''s contention and affirmed the view of the Tribunal that the impugned goods were capital goods entitled to credit under Rule 57Q of Central Excise Rules.

It is seen from the facts narrated in the case before us that the item in question were classifiable under Chapter Heading 84.31 and they were parts of materials conveying equipments falling under Chapter Heading 84.28. Apart from that, there were goods falling under Chapter Heading No. 84.74 for the period between 23.07.1996 and 31.08.1996. The dispute herein related to goods falling under Chapter Heading 84.74. As is evident from the reading of the amended Rule 57Q(1)(d) under Notification No. 14/96-CE dated 23.7.1996 , the provision reads as follows:

"(d) components, spares and accessories of the goods specified against items (a) to (c) above"

Going by the liberal meaning given to Clause (d) in Rule 57Q that the position prior to 23.07.1996 Supreme Today With All High Courts Page 5 of 6 when credit was available for components, spares and accessories irrespective of the classification of specified capital goods, we have no hesitation in accepting the case of the assessee. Quite apart, even going by the circular, we agree with the argument advanced by the learned counsel for the assessee that the amendment under Notification No. 25/96 dated 31.8.1996 has to be read only as clarificatory and retrospective effect has to be given for availing modvat credit. In view of this reasoning, we find that capital goods itself were eligible for modvat credit under Rule 57Q.

Thus, in the light of the decision of this court following the Apex court decision and in the background of the circular issued by the Government of India dated 2.12.1996 that the benefit of modvat credit under Rule 57Q would be applicable to all components, spares and accessories of the specified goods, irrespective of their classification under any chapter heading, we have no hesitation in granting the relief in favour of the assessee, thereby the order of the Customs, Excise and Service Tax Appellate Tribunal is set aside. Consequently, the Civil Miscellaneous Appeal is allowed. No costs.

In view of the fact that the questions framed above have already been considered and answered by this Court in India Cements case (supra), the substantial questions of law are answered accordingly.

In the result, this appeal fails and the same is dismissed. However, there shall be no order as to costs.