Dated 06th November, 2019

 Subsequent judgment of the Apex Court cannot be used to re-open assessment or disturb past assessment which have been concluded-Department cannot be authorised to re-open the assessment, which stood closed on the basis of the law as it stood at the relevant time.

Credit is allowed on structures used for support of underground mines as it is a statutory and safety requirement, mere reference to the definition to determine such structural support as being civil structure is immaterial, it is relevant to ascertain functionality before allowing or disallowing credit.


Facts of Case

Western Coal Fields Limited(hereinafter referred to as “the Company”) has availed credit on 'plates, angles, beam, bars, etc.' falling under chapter 72 and 73 of the CETA, 1985 as inputs used in the manufacture of capital goods and also used in the repair, maintenance of equipment and plant & machinery. Credit has also been availed on input deployed for roof support and roof stitching. However, credit was denied by the adjudicating authority on the ground of lack of evidence to correlate the inputs with the repair work and the manufacturing of capital goods. Moreover, it was alleged that the inputs being used for civil structure is ineligible for availment. Hence, this appeal assails the denial of CENVAT credit of duties paid on 'plates, angles, beam, bars, etc.' falling under chapter 72 and 73 of the CETA, 1985, for lack of conformity with the definition of 'capital goods' in rule 2(a) of CENVAT Credit Rules, 2004 [hereinafter referred to as “CCR”] or of 'inputs' in rule 2(k) of CCR.

Contention of the Appellant

The Company contests that the denial of credit on inputs, used in the maintenance and repair of equipment and plant and machinery in the workshop and inputs used for manufacture of capital goods, on the ground of lack of information to identify the relation of inputs with such activities is unsustainable. It was incumbent on the officer to ask for the details and provide with an opportunity to produce the relevant data substantiating the eligibility of credit.

Moreover, it was contested that the inputs had been utilized for maintenance/repair for manufacture of capital goods, such as conveyor systems, and that most had been deployed to prevent collapse of overhead earth which is a mandatory prescription under the Coal Mining Regulations, 2011 issued under the Mines Act, 1952.Also, the eligibility for CENVAT credit has been decided by the Tribunal in The General Manager (Finance) v. Commissioner of Central Excise & Service Tax, Raipur wherein the appellant was engaged in the mining and selling of coal from the mines located in the State of Chhattisgarh and availing Cenvat credit of Central Excise duty paid on inputs and capital goods for discharging Central Excise duty on the finished product i.e. HD Steel, Steel Cogs/TIS Cogs, TMT Rod & Bar, MS Plate, MS Pipes, MS nut, Telescopic Steel Props, Steel Sleepers, etc. The credit was allowed on inputs participating directly or indirectly in the manufacture of final product in view of the broad definition of "inputs" contained in Rule 2(k) of the CCR, 2004. To quote:

"We find from the submissions made by the appellant that the impugned goods have been duly used in or in relation to the manufacture/production of HD Steel, Steel Cogs/TIS Cogs, TMT Rod & Bar, MS Plate, MS Pipes, MS nut, Telescopic Steel Props, Steel Sleepers, etc., without which it would not be possible to undertake mining activities. Since the disputed goods are not falling under the excluded category of goods specified in the definition of inputs, we are of the view that Cenvat credit can be extended to those goods as per the broad definition of "inputs" contained in Rule 2(k) of the Cenvat Credit Rules, 2004, excepting cement, which has no participation either directly or indirectly in the manufacture of final product"

Contention of the Respondent

The respondent, with reference to the definition of 'capital goods' in rule 2(a) of CENVAT Credit Rules, 2004, pointed out that the inputs had not been used in any product that meets the description of 'capital goods'. It has been submitted that deployment for retaining the earthen roof and sides of the mine tunnels makes these to be civil structure is clearly one of the exclusions enumerated in rule 2(k) of CENVAT Credit Rules, 2004.

Judgement of the Court

The details are placed before the benchare submitted that had already been laid before the original authority. Had this information been deficient, it was incumbent upon the adjudicating authority to place the appellant on notice of such and require production of data that would satisfy. The bulk of the demand pertains to the deployment of inputs for roof support and roof stitching and the fabrication/base bed placed for pumps and other equipments. The adjudicating authority appears to believe that the goods used for making base/bed plates for pumps/motors and for fabrication of poles are excluded from the definition of 'inputs' in rule 2(k) of CENVAT Credit Rules, 2004 by the subsequent restriction to avail credit on construction of civil structure or part thereof. It was held that fabricated poles and base/bed plates are necessary to provide support for capital goods if not resting upon permanent foundation. For the denial of credit on inputs used for roofing, the impugned order appears to have placed reliance on a definition that is technical in nature.

'Civil structure' is primarily used to house either people or goods or equipments. The roofing in a mine, on the other hand, offers protection from the possibility of mud shifting in the area that has been drilled. It, therefore, hardly conforms to the expression 'civil structure'. Moreover, such roofing and stitching in underground mines is a statutory requirement, and the adjudicating authority, while acknowledging it to be so, has disregarded the undeniable essentiality by mere reference to definitions. It is more relevant to ascertain functionality before allowing, or denying, CENVAT credit. It has been held judicially that any statutorily mandated activity is essential for manufacture and hence, the product inputs/input service is eligible for availment of CENVAT credit. Accordingly, the denial of CENVAT credit for roofing and roof support and roof stitching has no basis in law.

In view of the above findings, the impugned order denying credit has been set aside and the matter remanded back to the original authority for a fresh ascertainment of the entitlement to the extent permissible in accordance with the finding.

1 2019-TIOL-2056-CESTAT-DEL


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