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HC : Allows CENVAT credit; 'Structurals' supporting plant & machinery qualify as 'capital goods' & 'inputs'

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  • HC holds that MS structurals, cement, iron and steel supporting ‘plant & machinery’ that is used to manufacture final product viz. sugar & molasses, are an integral part thereof and accordingly, CENVAT credit is available thereon, not only as ‘capital goods’ but also as ‘inputs’ under CENVAT Credit Rules, 2004 (CCR);
  • Referring to SC ratio in Saraswathi Sugar Mills Ltd. and Rajasthan Spinning and Weaving Mills Ltd., HC states that as long as it is shown that "component" and/or "accessory" is an integral part of capital goods, which in turn, fall within scope and ambit of Rule 2(a)(A)(i) of CCR, they would also qualify as ‘capital goods’; Amendment in Explanation 2 to Rule 2(k) excluding structural, cement, angle etc. from ‘input’ definition is not clarificatory and would operate prospectively w.e.f. July 7, 2009, holds HC while referring to Gujarat HC decision in Mundra Ports & Special Economic Zone Ltd. which disagreed with view taken by CESTAT in Vandana Global Ltd;
  • Moreover, observes that Finance Minister’s Speech cannot control meaning of words used in Notification No. 16/2009 and would not help Revenue’s cause as it uses a generic expression "to clarify", which when read with first part stating that it would have effect "immediately", only fortifies view that amendment was configured to operate from date of its publication and not retrospectively;
  • Consequently holds that, “whether the "user test" is applied, or the test that they are the integral part of the capital goods is applied, the Assessees, in these cases, should get the benefit of CENVAT Credit, as they fall within the scope and ambit of both Rule 2(a)(A) and 2k”  : Madras HC
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