Custom, Excise & Service Tax Tribunal
Dredging Corporation Of India vs Visakhapatnam - G S T on 10 October, 2025
(1) Appeal No. ST/30201
& 30206/2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 30201 of 2016
(Arising out of Order-in-Original No. VSP-EXCUS-001-COM-040-15-16 dated 07.01.2016
passed by Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I)
M/s Dredging Corporation of India .. APPELLANT
Port Area, Visakhapatnam,
Andhra Pradesh - 530 035.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Visakhapatnam-GST GST Commissionerate, Port Area, Visakhapatnam, Andhra Pradesh 530 035.
AND Misc Application No. ST/CROSS/30681/2016 in Service Tax Appeal No. 30206 of 2016 (Arising out of Order-in-Original No. VSP-EXCUS-001-COM-040-15-16 dated 07.01.2016 passed by Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I) Pr. Commissioner of Customs & .. APPELLANT Central Excise Visakhapatnam-I Central Excise Building, Port Area, Visakhapatnam, Andhra Pradesh -530 035.
VERSUS
Dredging Corporation of India .. RESPONDENT
Dredge House, Port Area,
Visakhapatnam,
Andhra Pradesh - 530 035.
APPEARANCE:
Shri Narendra Dave, Advocate for the Assessee.
Shri A. Rangadham, Authorised Representative for the Department. CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30412-30413/2025 Date of Hearing:12.06.2025 Date of Decision:10.10.2025 [ORDER PER: ANGAD PRASAD] M/s. Dredging Corporation of India (hereinafter referred to as assessee) has filed an appeal against the Order-in-Original No VSP-EXCUS- 001-COM-040-15-16 dated 07.01.2016. Against the same Order-in-Original, (2) Appeal No. ST/30201 & 30206/2016 Department has also filed above appeal no. ST/30206/2016 and challenged the dropping of penalty vide impugned order.
2. Learned Commissioner has passed the order as thus:
a. I disallow the Cenvat Credit of Rs. 33,64,90,592/- (Rupees Thirty three crores sixty four lakhs ninety thousand five hundred and ninety two only) (including Ed. Cess and S & H Ed. Cess), to M/s. Dredging Corporation of India, Visakhapatnam under Rule 14 of the Cenvat Credit Rules, 2004 and further order M/s. Dredging Corporation of India, Visakhapatnam to pay an amount of Rs. 33,64,90,592/- (Rupees Thirty three crores sixty four lakhs ninety thousand five hundred and ninety two only) (including Ed. Cess and S & H Ed. Cess) under Rule 14 of Cenvat Credit Rules 2004 read with Section 73 of the Finance Act, 1994.
b. I order M/s. Dredging Corporation of India, Visakhapatnam, to pay interest under Rule 14 of the Cenvat Credit Rules 2004 read with Section 75 of the Finance Act, 1994 at the appropriate rate, on the amount demanded at (a) above.
c. I do not impose any penalty under Rule 15(1) of the Cenvat Credit Rules 2004. d. I also do not impose any penalty under Rule 15A of the Cenvat Credit Rules, 2004.
3. Brief fact of the case is that the assesse is engaged in providing various taxable services including dredging services, business auxiliary services and insurance auxiliary services and accordingly obtained Service Tax registration with the jurisdictional Service Tax Authorities. The Company imported a 'Self Propelled Trailer Suction Hopper Dredger (hereinafter referred to as "Dredger") falling under tariff item 89051000 of the Customs Tariff Act, 1975 vide Bill of Entry No. 8789313/2012 dated 18.12.2012. As the Company was intending to use the Dredger to provide taxable dredging services, they treated the said dredger as inputs and availed CENVAT credit of CVD amounting of Rs.33,64,90,592/- paid at the time of import in accordance with Rule 4 of the Cenvat Credit Rules, 2004 (CCR) and disclosed the same in their periodical service tax returns.
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& 30206/2016
Moreover, the Company also capitalized the value of the dredger in its books of accounts though did not include the value of the CVD portion of the value in the capitalized value, as the Company had already availed CENVAT credit on the said portion.
4. The Assessee received a Show Cause Notice (SCN) No. V/15/17/2015- ADJ dated 27.02.2015, alleging irregular availment of credit on the grounds that credit will not be available on the imported dredger as the same is not covered in terms of definition in CCR 2004 either as 'inputs' or as 'capital goods'. This was based on plain reading of Rule 2(a) defining capital goods and Rule 2(k) defining input. The Company filed detailed reply. Learned Adjudicating Authority vide impugned Order-in-Original No. VSP-EXCUS-001- COM-040-15-16 dated 07.01.2016 interalia held as under:
Credit will not be available in respect of the dredger under the head of 'capital goods' as the same is not covered by the definition of capital goods under the CCR.
Credit will also not be available in respect of the dredger under the head of 'inputs' as the same is in the nature of a capital asset which has been capitalized in the books of accounts of the Company and depreciation has been claimed on the said asset.
As the current case pertains to incorrect availment of credit, the Company will be liable to pay the interest under Rule 14 of the CCR on the said credit amount availed on the dredger.
The Company will not be liable to pay any penalty under Rule 15 of the CCR
5. Learned Counsel for the assesse has mainly argued that a manufacture or producer of final products or a provider of taxable services shall be allowed to take Cenvat Credit of CVD paid on any input or capital goods received in the factory of manufacturer of final product or premises of the provider of output service on or after the 10 th day of September 2004, (4) Appeal No. ST/30201 & 30206/2016 therefore, the concerned dredger must fall under the category of either input or capital goods under CCR.
6. Learned Counsel for the assessee argued that the dredger used by the Company for output services, i.e., dredging service, are covered under the definition of 'inputs' under Rule 2(k) (iv) i.e. all goods used for providing output service, if the same is not covered under the exclusions provided in the said provision. One such exclusion covers 'capital goods'. Dredger in the instant case is being used in the provision of output service as mentioned in the impugned order. Therefore, the dredgers are covered by the plain language of Rule 2(k)(iv). The reference to the terms 'capital goods' used in exclusion clause is very much in the context of the CCR 2004 and accordingly has to be interpreted strictly as defined under Rule 2(a) of the CCR. Learned Counsel for the appellant also argued that no recourse can be made to any definition under the Income Tax Act or any other legislation for the same. Therefore, since admittedly dredger has not been considered as "Capital Goods" in terms of Rule 2(a) and hence for 2(k) also, it will not be capital goods so as to cover them in the exclusion clause.
7. Learned Counsel for the assessee relied on the decision of the Hon'ble Supreme Court in the case of MSCO Private Limited Vs Union of India [1985 (19) ELT 15 (S.C.)], wherein, it was held that the meaning of an expression in one act cannot be relied upon, while construing other statutes and it must be restricted to such statute alone. He has also relied on Hon'ble Supreme Court decision of Prestige Engg (India) Ltd., Vs CCE [1994 (73) ELT 497 (SC)], wherein, the term 'manufacture', the Court held that once an expression is defined in the Act, that expression wherever it occurs in the Act, Rules or Notifications issued thereunder, should be understood in the same sense. As per the appellant, the term manufacture is defined in the (5) Appeal No. ST/30201 & 30206/2016 statute, recourse cannot be made to the ordinary meaning of the term. Similarly, Hon'ble Supreme Court in the case of Indo-International Industries Vs Commissioner of Sales Tax [1981 (8) ELT 325 (SC)], observed that any term or expression defined in the enactment must be understood in the light of the definition given in an Act, in the absence of which the meaning of the term as understood in common parlance or commercial parlance must be adopted. Learned Counsel for the appellant also placed the decision of CCE, New Delhi Vs Connaught Plaza Restaurant Pvt Ltd., [2012 (286) ELT 321 (S.C.)], wherein, Hon'ble Supreme Court held that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. The terms 'capital goods' and 'inputs' have been clearly defined under the CCR and it is provided in the definition itself that the said terms are to be understood in a specific way when mentioned in the CCR. As per Learned Counsel, the term 'capital goods' is defined under the CCR and will not cover their goods i.e. dredger in the instant case, and hence the products will not be hit by exclusion under Rule 2 (k)(C) excluding 'capital goods'. Learned Counsel for the assessee argued that in the impugned order it has held that the said goods will be hit by the said exclusion by virtue of it's being capital assets on which income tax depreciation has been claimed. It is submitted that depreciation has not been claimed on the CVD portion of the said goods and therefore no double entitlement under two different Acts. Moreover, there is no exclusion or bar under any of the provisions of the CCR barring availment of credit of goods as 'inputs' on the basis that the same has been treated as capital assets in the books of accounts or under some other statute. Capitalization of goods for income tax purposes will not in any way bar availment of credit of the same as 'inputs' for the purpose of availment of Cenvat Credit and the said (6) Appeal No. ST/30201 & 30206/2016 treatment under income tax is completely immaterial. Learned Counsel for the assessee in this regard relied on the following case laws:
Dish TV India Ltd., Vs Commissioner of CGST, Noida [2024 SCC OnLine CESTAT 508 (Tri-All.)] Shree Rama MultiTech Ltd. Vs CCE, Ahmedabad [2011 (266) ELT 81 (Tri. - Ahmd.)]
8. On the other hand, Learned AR points out that since it is admittedly a capital good for the purpose of income tax, same has to be understood in the sense that these are capital goods, irrespective of whether it is explicitely covered within the definition of capital goods as per Rule 2(a) or otherwise. He further submits that Rule 2(a) only provides certain specific capital goods and not all types of capital goods.
9. Department is also in appeal against non-imposition of penalty by Adjudicating Authority in the impugned order for which a cross-objection has been filed by the assessee. However, since the assessee was not aggrieved by non-imposition of penalty, they could not have come by way of cross- objection, however, their submissions can be taken as counter to the grounds taken by the Revenue. He further argues that they being Public Sector Undertaking, the Adjudicating Authority has rightly dropped the imposition of penalty.
10. Heard both the sides and perused the records.
11. We have considered the impugned order along with the submissions made by both sides in the appeals during the course of argument.
12. The short question to decide is whether the dredger imported by assessee can be considered as 'input' for the purpose of providing output service i.e. dredging service or it has to be treated as capital good despite (7) Appeal No. ST/30201 & 30206/2016 it's not being explicitely covered within the definition of capital goods under Rule 2(a). We note that, all the equipments not falling in the list are not to be considered as of capital goods in terms of said Rule as alleged by Department. Dredger is classified under Chapter 89 and is not covered under the definition of capital goods. Rule 2(a) of CCR 2004 defines capital good as under:
"2. In these rules, unless the context otherwise requires:
(a) "capital goods" means, -
(A) The following goods, namely:-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, [heading No. 6805, grinding wheels and the like, and parts thereof falling under [heading 6804 and wagons of sub-heading 860692] of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; [xxx]
(vii) storage tank; and
13. Learned Counsel for the assesse as well as Department admits that the dredger, per se, is not covered under the definition of capital goods in terms of CCR. The claim of the assesse is that the dredgers are covered under the definition of 'inputs' under Rule 2(k)(iv) of the CCR 2004. Rule 2(k) defines input at the time of import as under:
"input" means -
(i) all goods used in the factory by the manufacturer of the final product; or
(ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or
(iii) all goods used for generation of electricity or steam [or pumping of water] for captive use; or
(iv) all goods used for providing any [output service; or] but excludes-
(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) any goods used for-
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, (8) Appeal No. ST/30201 & 30206/2016 except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of section 66E of the Act;
(C) capital goods, except when,-
(i) used as parts or components in the manufacture of a final product; or
(ii) the value of such capital goods is upto ten thousand rupees per piece; (D) motor vehicles;
(E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product.
Rule 2(k)(iv) provides that all goods used for providing any output service are to be treated as input but excludes (C) capital goods, except when used as parts or components in the manufacture of a final product.
14. Principal Bench, CESTAT in the case of Aditya Cement v. CCE, Jaipur-II [2009 (245) E.L.T. 266 (Tri.-Del)], interalia, observed that "Further to treat the dumper (which is treated as capital goods by the assesse themselves) as an input may do violence to the general Cenvat scheme. Therefore, we are not able to, prima facie, agree with the learned Advocate that the said dumber is input". However, Learned Counsel for the assessee submits that it is not a final judgment, and is only a prima facie view.
15. Learned AR for the Department has also relied on Karnataka High Court decision in the case of State of Karnataka Vs Dredging Corporation of India Ltd., [2020 (373) ELT 662 (Kar)], wherein, the issue whether Dredger is a machine or ocean going vessel, Hon'ble High Court held that it is an ocean going vessel i.e. ship and not machinery. He has also relied on Hindustan Zinc Ltd., Vs Commissioner of Central Excise, Jaipur [2013 (289) ELT 377 (Tri-Del)], in which Principal Bench, Delhi following the Aditya Cement, supra, decision held that goods which are accounted as capital (9) Appeal No. ST/30201 & 30206/2016 assets cannot be considered as inputs and accepted revenue's argument that LDPT is neither covered by definition of 'capital goods' nor 'inputs' in CCR 2004. Whereas, the Co-ordinate Bench, in the case of M/s Dish TV India Ltd., Vs Commissioner of CGST [2024 (5) TMI 1150, CESTAT - All], interalia, held that it is a well settled principle in the law that the taxing statute needs to be construed strictly according to the words, phrases used in the Statute, there can be no other interpretation when literal interpretation is unambiguous. It is a general principle of interpretation, since there is no ambiguity in the Rule. Para 4.5 and 4.7 are cited below for ease of reference:
4.5 Set top boxes classifiable under Chapter 85 do not find any mention in the exclusion category. That being so, we do not find any reason why these goods could not have been treated as input for provision of the output services by the Appellant. It is a well settled principle in the law that the taxing statute needs to be construed strictly according to the words phrases used in the statute; there can be no other interpretation when literal interpretation is unambiguous. Such a preposition flows from the following cases:-
A. Sneh Enterprises [2006 (202) E.L.T. 7 (S.C.)].
"25. While dealing with a taxing provision, the principle of „Strict Interpretation‟ should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are 8 Service Tax Appeal No.70317 of 2018 possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue."
B. Acer India [2007 (218) E.L.T. 17 (S.C.)];
"21. Furthermore, the Computers (Additional Duty) Rules, 2004 is a taxing statute. It required to be construed strictly. [See Manish Maheshwari v. Asstt. Commissioner of Income Tax and Anr., 2007 (3) SCALE 627 and Southern Petrochemical Industries Co. Ltd. v.
Electricity Inspector and E.T.I.O. and Ors., 2007 (7) SCALE 392]. So construed, we are of the opinion, that the interpretation by the Tribunal is in consonance with the aforementioned rules of interpretation."
C. Dilip Kumar & Company [2018 (361) E.L.T. 577 (S.C.)] "19. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act.
20. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the (10) Appeal No. ST/30201 & 30206/2016 Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose [Assistant Commissioner, Gadag Sub-Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC 355]. Not only that, if the plain construction leads to anomaly and absurdity, the Court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation.
21. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision-making. Insofar as taxation statutes are concerned, Article 265 of the Constitution [265. Taxes not to be imposed save by authority of law - No tax shall be levied or collected except by authority of law.] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the Legislature.
22. At the outset, we must clarify the position of „plain meaning rule or clear and unambiguous rule‟ with respect of tax law. „The plain meaning rule‟ suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase "cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio". Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals case (Infra para
37).], though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory.
23. Next, we may consider the meaning and scope of „strict interpretation‟, as evolved in Indian law and how the higher Courts have made a distinction while interpreting a taxation statute on one hand and tax exemption notification on the other. In Black‟s Law Dictionary (10th Edn.) „strict interpretation‟ is described as under :
Strict interpretation. (16c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text‟s authors or ratifiers, and no more. - Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatio stricta; interpretatio restricta; interpretatio verbalis. 3. The philosophy underlying strict interpretation of statutes. - Also termed as close interpretation; interpretatio restrictive.
See strict constructionism under constructionism. Cf. large interpretation; liberal interpretation (2).
"Strict construction of a statute is that which refuses to expand the law by implications or equitable considerations, but confines its operation to cases which are clearly within the letter of the statute, as well as within its spirit or reason, not so as to defeat the manifest purpose of the legislature, but so as to resolve all reasonable doubts against the applicability of the statute to the particular case.‟ Wiliam M. Lile et al., Brief Making and the use of Law Books 343 (Roger W. Cooley & Charles Lesly Ames eds., 3d ed. 1914).
"Strict interpretation is an equivocal expression, for it means either literal or narrow. When a provision is ambiguous, one of its meaning may be wider than the other, and the strict (i.e., narrow) sense is not necessarily the strict (i.e., literal) sense." John Salmond, Jurisprudence 171 n. (t) (Glanville L. Williams ed., 10th ed. 1947).
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24. As contended by Ms. Pinky Anand, Learned Additional Solicitor General, the principle of literal interpretation and the principle of strict interpretation are sometimes used interchangeably. This principle, however, may not be sustainable in all contexts and situations. There is certainly scope to sustain an argument that all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation. The decision of this Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh v. Presiding Officer, Labour Court Chandigarh and Ors., (1990) 3 SCC 682, made the said distinction, and explained the literal rule-
"The literal rules of construction require the wording of the Act to be construed according to its literal and grammatical meaning whatever the result may be. Unless otherwise provided, the same word must normally be construed throughout the Act in the same sense, and in the case of old statutes regard must be had to its contemporary meaning if there has been no change with the passage of time."
That strict interpretation does not encompass strict - literalism into its fold. It may be relevant to note that simply juxtaposing „strict interpretation‟ with literal rule‟ would result in ignoring an important aspect that is „apparent legislative intent‟. We are alive to the fact that there may be overlapping in some cases between the aforesaid two rules. With certainty, we can observe that, „strict interpretation‟ does not encompass such literalism, which lead to absurdity and go against the legislative intent. As noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or inferences, then „strict interpretation‟ can be implied to accept some form of essential inferences which literal rule may not accept.
25. We are not suggesting that literal rule de hors the strict interpretation nor one should ignore to ascertain the interplay between „strict interpretation‟ and „literal interpretation‟. We may reiterate at the cost of repetition that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well-settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute." D. VVF India Ltd. vs. State of Maharastra 2023 CENTAX 421 (S.C);
"11. ..... Justice Bhagwati in A.V Fernandez v. State of Kerala AIR 1957 SC 657, writing for a Constitution Bench, elucidated the principle of strict interpretation in construing a taxing statute as follows:
"29. In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case of not covered within the four corners of the provisions of the taxing statue, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter."
4.7 There is no dispute that Cenvat credit is admissible to the Appellant. Revenue‟s only dispute is with regards to the admissibility under capital goods for any inputs and that too on the basis of accountancy practices followed by the Appellant. We do not find any merits in the argument that just because these goods have been capitalized in the books of accounts, they could not have been treated as input. In the case of Tuticorin Alkali Chemicals & fertilizers Ltd. [[1997] 6 SCC 117] Hon‟ble Supreme Court has observed as follows:
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"29.It is true that this Court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override Section 56 or any other provision of the Act. As was pointed out by Lord Russell in the case of B.S.C. Footwear Ltd, the Income Tax law does not march step by step in the footprints of the accountancy profession."
In the case of Shree Rama Multi Tech Ltd., Vs Commissioner of Central Excise, Ahmedabad [2011 (266) ELT 81 (Tri-Ahmd)] also it was held that inputs used in or in relation to manufacture, assessee was eligible to take credit of duty paid on them. However, the facts of this case are distinguished and hence not relevant.
16. In these appeals, the admitted fact is that the assessee themselves are treating dredger as capital assets/goods for the purpose of claiming depreciation under Income Tax Act. They have argued that they were not including the value of CVD for the purpose of claiming depreciation. It is an admitted position that a plain reading of definition of capital good in CCR would not cover dredger. However, the expression used for defining capital good in Rule 2(k)(C) has to be construed vis-a-vis the definition given under Rule 2(a) and it has to be understood in the context in which the said expressions have been used for considering any good either as input or capital goods under CCR. We find that 2(k) defines input and covers all kind of goods in relation to certain activities or with reference to certain end use. However, it also excludes certain category of goods from the purview their being treated as input and one of the exclusions is "capital goods", except for when used as parts or components in manufacture of final product. Therefore, the intension is apparent that all types of inputs are covered within 2(k), barring certain inputs which may or may not be capital goods, as per 2(k)(A) to (F). While, it is a fact that a plain reading of provision would not cover dredger in the category of capital goods, but the definition (13) Appeal No. ST/30201 & 30206/2016 itself provides that certain definition could be interpreted in the manner other than what has been indicated in the rules, if the context otherwise requires. Therefore, we find that the whole dispute is centering around the definition of capital good. If the dredger is treated as capital, in view of it's being treated as one under the Income Tax Act, then it gets excluded from being treated as input. Further, if the expression capital good used in the exclusion clause under Rule 2(k) is to be construed in terms of the definition of capital goods under the CCR itself, then dredger would not be considered as capital goods and hence the exclusion clause would not be applicable to the assesse. We find that the Rule 2 of the CCR 2004 provides for definition which starts with "in these rules, unless the context otherwise requires (a) capital goods means and (k) input means". Therefore, the issue is whether the context allows the Department to go beyond the explicite definition given to the word "capital goods" or it enables the Department to enlarge the scope so as to interpret the term capital goods differently under Rule 2(a) and under Rule 2(k). We find that, essentially when the term "unless the context otherwise required" is used in any legal drafting, it essentially allows for certain flexibility in the interpretation while deciding the scope of definition used. It may also provide that definitions may not necessarily be applied rigidly but rather in accordance with the context and therefore giving scope for departure from a liberal interpretation, when the context requires the same. We find that in this regard, the definition for the capital goods the term "means" and specify specific category from (a)(i) to (viii), (b) and (c). Therefore, it is obvious that only limited items have been taken as capital goods and not all the possible items that capital good under peculiar circumstance but may not be a capital goods under different circumstances depending on end use. On the other hand, the input has been defined as means items covered from k(i) to (vi). Therefore, the CCR defines both the (14) Appeal No. ST/30201 & 30206/2016 capital goods and input in a very restrictive term with certain inclusion and exclusion and therefore, it is obvious that all possible capital goods and all possible inputs have not been considered for the limited purpose of their eligibility within the scheme of CCR. The exclusion clause at v(c) is essentially to exclude capital goods, per se, from being defined as input except for a situation where an item is being treated as capital goods, are used as parts or components in the manufacture of a final product.
17. Various courts and judicial forums have examined the expression "unless the context otherwise requires" has been used in definitions used in a statute and generally have held that general rule on construction is not only to look at the word but to look at the context also. Therefore, while the expression used in the definition of capital good used the term "means", which is essentially required to be given it's ordinary or natural meaning, however, when the expression has been used "unless the context otherwise required" it essentially extends the meaning of the word. We find from the wording itself and the categories of goods covered under the category of capital goods in rule 2(a), it is obvious that very specific goods can be covered under the category of capital goods and there is no ambiguity about the items which will not be covered or covered within the plain reading of the wordings used for defining capital goods under Rule 2(a). Whereas, the Rule 2(k)(iv) also covers within its ambit goods used for providing any output service, but qualifies and excludes certain specific categories from being treated as inputs for the purpose of CCR. Therefore, the expression capital goods at Rule 2(K)(C) has to be understood in the context in which it has been used under Rule 2(k). It is to be seen that motor vehicles are also excluded from being considered as inputs, whereas, motor vehicles have been considered as capital good also under Rule 2(a)(B). Similarly, dumpers (15) Appeal No. ST/30201 & 30206/2016 and tippers falling under Chapter 27 have also been treated as capital goods for providing certain specific service. Therefore, in an event where the dumpers and tippers are treated as capital goods, the same would not be treated as input for providing output service, but will still be covered within the definition of capital goods. Therefore, we find that the argument taken by the Revenue that the scope is to inprete the expression capital goods differently for the purpose of Rule 2(a) and for the purpose of Rule 2(k) is not in sync with the scheme of CCR, which is a special code by itself and even if the context has to be analysed in which these definitions are to be interpreted differently, it has to be looked beyond the CCR or for that matter beyond the parent act i.e Central Excise Act and Finance Act 1994, under which CCR has been formulated. Since the term capital goods has not been defined under CEA, therefore, it has to be understood in terms of CCR itself. We find force in the submission of the assesse and supported by the judgments in the case of Dish TV India Ltd., supra, to hold a view that what is not to be treated as capital good under Rule 2(a) can also not be treated as capital good for the purpose of Rule 2(k) because if we do so, it will lead to an absurd situation where, we are not considering dredger as capital good for the Cenvat Credit purpose, whereas, we are treating it as a capital good for the purpose of exclusion under Rule 2(k). A good can be a capital good or an input on strict construction of definition used in the statute and that is why expression such as "unless the context otherwise required" are used to interpret the same in a manner which does not lead to an absurd situation. In the present appeals, we find that a consistant view has to be taken and in terms of the same, the expression capital goods used in Rule 2(k) has to be understood in terms of definition of capital goods used under Rule 2(a). We also find force in the submission that the definition of a particular goods under a different statute cannot become the basis for deciding an issue (16) Appeal No. ST/30201 & 30206/2016 under a different statute, especially when the term has been clearly defined within the statute, under which it is being examined for the purpose of eligibility or otherwise. Therefore, we find that even taking into the context in which these two terms are to be examined, we do not see any reason as to why the term capital goods used under Rule 2(k) has to be interpreted differently than the definition of capital goods given under Rule 2(a) for the purpose of eligibility or otherwise under CCR. In view of the same, we do not find any merit in the impugned order passed by the Commissioner and the same is liable to be set aside.
Department Appeal no. ST/30206/2016:
18. Department has filed their appeal against the impugned order challenging dropping of penalty by the Commissioner. Learned AR argued that the assesse has availed Cenvat Credit irregularly in contamination of provision of Rule 3 of CCR, hence, the assesse is liable for penalties under Rule 15(1) and Rule 15(a) of the CCR for the contraventions of the provisions.
19. On the other hand, Learned Counsel for the assessee submitted that the Cenvat Credit was correctly availed on the goods in the instant case, therefore, the question of imposition of penalty on the said availment of credit is not arise.
20. There is no any evidence that the appellant availed the credit on some malafied basis. Appellant has apparently taken credit on mis-interpretation of the rules as discussed above. Therefore, there cannot be any element of suppression of facts etc., in so far as the Cenvat Credit availed by the appellant. Further, the appellant is a Government undertaking and as such it (17) Appeal No. ST/30201 & 30206/2016 cannot be alleged that the company has deliberately suppressed the fact with the intention to evade the payment of tax.
21. In the case of Visakhapatnam Port Trust Vs Commissioner of Customs, Central Excise & Service Tax, Visakhapatnam-I [2019 (27) GSTL 244 (Tri- Hyd)], Co-ordinate Bench held that appellant is an organisation under the Government of India and it is extremely difficult to imagine that they have an intention to evade payment of service tax. Learned Commissioner in the impugned order on this point based on Principal Bench, New Delhi decision in the case of Uttar Pradesh State Sugar and Cane Development Corporation Ltd., Vs Commissioner of Central Excise, Allahabad [2009 (242) ELT 260 (Tri-Del)], in which it was held that "Since the Appellants are public-sector undertaking of the Govt of U.P., the allegation of mis-statement, or suppressions of fact with intent to evade the payment of duty does not make any sense. It is unconceivable that the Sugar Mills owned by a State Govt. owned Corpn. Would try to evade the payment of duty by resorting the wilful suppression of facts.". These decisions have been relied in the impugned order. Therefore, there is no infirmity in holding that no penalty can be imposed. Further, as on merit itself the impugned order has been set aside, the appeal of Revenue becomes infructuous and is therefore disposed of accordingly.
22. Appeal is allowed. Appeal No.ST/30206.2016 filed by Department is disposed of accordingly.
(Order pronounced in the open court on _10.10.2025_) (A.K JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) jaya