Quick answer: In Toshiba JSW Power Systems (P) Ltd. v. Commissioner of GST and Central Excise (Final Order Nos. 41071-41072/2026, decided on 9 October 2026), a two-Member Bench of the Customs, Excise and Service Tax Appellate Tribunal at Chennai (Ajayan T.V., Member (Judicial), and Vasa Seshagiri Rao, Member (Technical)) held that a manufacturer was entitled under Rule 3(1) of the CENVAT Credit Rules, 2004 to credit of excise duty paid on capital goods that contractors supplied and installed in its factory under engineering, procurement and construction contracts. The Tribunal accepted the Revenue’s view that each contract was in substance a single works contract, but held that this did not defeat the credit: the Explanation to Rule 3 is not attracted because the value of goods transferred in a works contract lies outside the levy of service tax, and Rule 2A of the Service Tax (Determination of Value) Rules, 2006 is a valuation rule, not an exemption. The period was September 2010 to March 2016. The extended period of limitation was also held unavailable.
Key Takeaways
- Composite character did not decide the case. The Tribunal agreed with the Revenue that two purchase orders under a common letter of intent made one works contract, and still allowed the credit.
- Capital goods credit asks about the recipient’s output, not the plant. Whether the plant is immovable and non-excisable is a question for the person who makes the plant, not for the manufacturer who uses it to make dutiable goods.
- The Explanation to Rule 3 needs a real exemption, actually claimed. The Revenue must show a rule or notification granting exemption on condition of non-availability of credit, a claim to it on these goods, and a condition that operates against the recipient.
- Explanation 2 to Rule 2A binds the provider only. Its bar on the “provider of taxable service” does not reach the recipient of the works.
- Extended period failed. Separate orders and a contractor’s statement did not show suppression by the recipient.
- This is a CENVAT and service tax ruling. It construes the legacy credit scheme and does not decide any question under the Central Goods and Services Tax Act, 2017.
1. Introduction
A manufacturer expanding its factory typically engages specialist contractors to design, supply, install and commission systems such as air conditioning, fire protection or electrical networks. It bears excise duty through the price of the equipment, pays service tax on installation, and then claims credit of the duty against the duty on its own products. The Department has long questioned that credit where the contractor, and not the manufacturer, is the named buyer and where the equipment becomes part of an immovable plant.
Toshiba JSW Power Systems tests that dispute thoroughly. The Revenue argued that the manufacturer bought a plant and not goods; that the contracts were works contracts whose goods element was exempted or excluded from service tax, so that the Explanation to Rule 3 of the CENVAT Credit Rules, 2004 (the Credit Rules) bars credit; and that the contracts had been artificially split into supply and service orders to facilitate credit. The Tribunal conceded much of the premise and rejected the conclusion.
The decision matters for three reasons. It separates the characterisation of a contract from the entitlement to credit, which departmental notices often run together. It confines the Explanation to Rule 3 to exemptions that exist and were actually availed, and confines Explanation 2 to Rule 2A to the service provider. And it ties the extended period of limitation to the recipient’s own conduct rather than to the structure of its contracts.
The order is that of a regional bench and carries no reportable marking, so it should be cited as persuasive authority.
2. Case summary and background
The appellant, Toshiba JSW Power Systems (P) Ltd., is a joint venture of Toshiba Corporation, Japan, JSW Steel Ltd. and JSW Energy Ltd. It manufactures turbines, electric motors, generating sets and rotary converters at Manali, Chennai, and clears them on payment of excise duty. While setting up a new plant for steam turbines and generators in its factory, it engaged four contractors (Blue Star Ltd., ETA Engineering Pvt. Ltd., Metec Design & Construction Engineers India Pvt. Ltd. and Shakthi Electricals Chennai Pvt. Ltd.) for the design, supply, installation, testing and commissioning of systems such as air conditioning, fire protection, transformers and water systems (para 2).
Each contractor received a letter of intent and then two purchase orders, one for supply and one for installation. The goods were bought by the contractors from manufacturers and dealers whose duty-paying invoices named the contractor as buyer and the appellant as consignee at its factory. The appellant took credit of the excise duty on those invoices as credit on capital goods, and of the service tax on the erection bills (para 3).
The demand. Show Cause Notice No. 24/2015 dated 25 September 2015 proposed to recover Rs.1,93,97,137 as credit wrongly availed during September 2010 to March 2015, under Rule 14 of the Credit Rules read with the proviso to Section 11A(1) of the Central Excise Act, 1944 for the period up to 7 April 2011 and with Section 11A(4) thereafter, with interest and penalty under Rule 15(2) read with Section 11AC. The Revenue relied on the Board’s Order No. 58/1/2002-CX dated 15 January 2002 (a turnkey plant erected at site is immovable and not excisable), Section 65(105)(zzzza) of the Finance Act, 1994 (works contract service), Notification No. 12/2003-ST dated 20 June 2003 and Rule 2A of the Service Tax (Determination of Value) Rules, 2006 (the Valuation Rules). For the extended period it relied on a statement dated 27 October 2014 of Metec’s General Manager (Finance and Accounts) (paras 4 and 5).
Procedural history. Order-in-Original No. 68/2016 dated 15 December 2016 confirmed the demand under Section 11A(4) with interest and an equal penalty. A statement of demand dated 2 May 2016 for April 2015 to March 2016 was confirmed by Order-in-Original No. 4/2017 (S) dated 7 February 2017 (para 7). The Commissioner (Appeals) rejected the appeals by Order-in-Appeal Nos. 428 and 429/2017 (CTA-I) dated 4 December 2017 (para 8). The appeals were heard on 22 April 2026 and decided on 9 October 2026.
Issues and holding. The Tribunal framed five issues (para 13): the nature of the contracts and when property passed; capital goods status under Rules 2(a) and 3(1); the bar under Rule 2A and the Explanation to Rule 3; the extended period; and interest and penalty. It held that each contract was in substance a single works contract, though the split was not a sham; that property in the goods passed at the latest on incorporation into the appellant’s systems; that the goods were creditable capital goods; that the Explanation to Rule 3 did not apply for either part of the period; that the extended period was not validly invoked; and that interest and penalty fell. The impugned order was set aside (paras 24, 32, 43, 46, 47 and 49).
3. Legal analysis
3.1 The nature of the contracts
The Tribunal traced the Supreme Court’s works contract cases, from State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. and Article 366(29A)(b) of the Constitution to Larsen & Toubro Ltd. v. State of Karnataka and Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu. From Kone Elevator it drew the distinction that governs: separate contracts for purchase of components and for installation are a sale and a service, but a composite contract for supply and installation “has to be treated as a works contract” (para 15).
The appellant said the orders recorded two agreements. The Tribunal read the documents together and disagreed. The letter of intent accepted one price for supply, installation, testing and commissioning. Both purchase orders incorporated the letter, the bill of quantities and the tender. The supply orders fixed a combined schedule, took security on the combined value, withheld part of the supply price until erection or the Project Management Consultant’s completion certificate, and ran the defects liability period from commissioning (paras 16 to 18). Recognition of separate agreements, the Tribunal said, “extends to agreements which are in truth separate”, not to a single bargain recorded in two instruments. That is sound: Kone Elevator turned on a composite price and obligation, and the Tribunal looked for both.
It nonetheless declined to treat the split as a sham, since recording supply and erection separately “reproduces in the parties’ paperwork the very division which Article 366(29A)(b) effects by legal fiction”, and duty, VAT or CST and service tax were each paid on their portions (para 20). On property, it held that in a works contract property passes on incorporation, relying on Aristo Printers Pvt. Ltd. v. Commissioner of Trade Tax, Lucknow (2025 INSC 1188), and rejected bailment because no goods were shown to have been received into the appellant’s stores and issued to the contractors (paras 21 to 23). Because the documents “do not speak with one voice”, the finding on the moment of transfer is only “the better view” (para 22).
3.2 Capital goods received and used in the factory
Rule 3(1) allows credit of duty on capital goods “received in the factory”, Rule 2(a)(A) defines capital goods by description and place of use, and Rule 9(1)(a) recognises the manufacturer’s and dealer’s invoice as a credit document. None asks who owned the goods on arrival or who installed them (para 25). Receipt in the factory “is a requirement of place and not of person” (para 27).
The Tribunal relied on CCE v. Sunrise Chemical Industries (Gujarat High Court), which held that the rule “nowhere prescribes installation of the capital goods, nor does the Rule refer to ownership of the capital goods”, on CCE, Jalandhar v. International Tractors Ltd. (Punjab and Haryana High Court) as reported affirmed in CCE, Chandigarh v. Ambuja Cement Ltd., and on Bharti Airtel Ltd. v. Commissioner of Central Excise, Pune (2024 INSC 880). It added a textual point: from 1 April 2011 the definition of “input” in Rule 2(k), as substituted by Notification No. 3/2011-CE (NT) dated 1 March 2011, speaks of use in the factory “by the manufacturer”, whereas the definition of capital goods speaks only of use in the factory, so the difference was taken to be deliberate (paras 28 and 29). Some of its authorities arose under earlier rules, but each construes the same two requirements of receipt and use in the factory.
The core of the analysis is the diagnosis of the Revenue’s error. The authorities below reasoned that the plant is immovable and non-excisable, the goods were consumed by the contractors in creating it, and therefore no one could take credit. The Tribunal held that this “put the right question to the wrong person” (para 30). Excisability of the product matters to the person who makes it; a contractor erecting an immovable plant as its own output cannot take credit on inputs because its output is not a final product under Rule 2(h). The appellant’s final products are dutiable turbines and generators, and the plant is the means of making them. The authorities below “mistook the means of manufacture for its product.”
Three supporting reasons follow (para 31). Both versions of Rule 2(k) exclude only civil and structural items such as cement, angles, channels and foundation material, not machinery under Chapters 84 and 85. The Board’s Order itself says components of a turnkey plant remain dutiable, so denying credit would embed that duty in the cost of the final goods. And since almost all heavy machinery is installed before use, a construction that denies credit on installed plant “empties the definition of most of its content”. It distinguished its own recent decision in The India Cements Ltd. (Final Order No. 41010/2026 dated 8 September 2026), where a distinct juristic entity had paid the duty (para 32).
3.3 The Explanation to Rule 3
This part has the widest consequences. The Explanation gives priority to another rule or notification that grants exemption on condition that credit is not available. The Tribunal broke the Revenue’s burden into four elements: a rule or notification granting exemption, a condition of non-availability of credit annexed to it, a claim to that exemption on these goods, and a condition capable of operating against the person now claiming credit (para 33).
On classification, the Tribunal accepted the principle in Sarvesh Refractories (P) Ltd. v. CCE & C and CCE & C v. MDS Switchgear Ltd. but limited its reach. An authority may construe the recipient’s own contracts, and the head under which a contractor pays tax does not fix their character, since Commissioner of Customs, Central Excise and Service Tax, Noida v. Interarch Building Products Pvt. Ltd. holds that a works contract provider cannot pay tax on gross value outside Rule 2A or the composition scheme. What the principle forbids is attributing to a provider, in proceedings against the recipient, a classification or valuation the provider did not adopt, and then importing a condition attached to it (para 34).
The Tribunal then turned the Revenue’s characterisation against it. Under CCE v. Larsen & Toubro Ltd. (2015), the taxable service in Section 65(105) did not reach composite works contracts, and the Supreme Court said: “Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise.” From 1 June 2007 Parliament taxed works contracts only on the service element, valued under Rule 2A by deducting the value of property in goods, as Interarch Building Products explains. Rule 2A is therefore “the statutory measure of the service element, and not a concession carved out of a wider levy”. An exemption under Section 93 of the Finance Act, 1994 presupposes a levy, and a notification exempting value that lay outside the levy “would exempt nothing”, so cannot be an exemption on condition within the Explanation (para 35).
This argument is strong because it uses the Revenue’s premise: the Revenue cannot call the contracts works contracts to import Rule 2A and also treat the excluded goods value as an exemption benefit. It rests on the settled proposition, from Larsen & Toubro, that the goods value was never within the levy.
From 1 July 2012 Notification No. 12/2003-ST stood rescinded by Notification No. 34/2012-ST dated 20 June 2012, and the only provision invoked was Rule 2A as substituted, whose Explanation 2 provides that “the provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract”. That is addressed to the provider and says nothing of the recipient (para 36). For September 2010 to June 2012, Rule 2A as inserted from 1 June 2007 contained no restriction on credit, and a Board circular is not a rule or notification granting exemption. The notice had also quoted Rule 2A with its reference to Section 66E(h) of the Finance Act, 1994, in force only from 1 July 2012, which the Tribunal called “a plain misstatement of the law” for the earlier period (para 37).
Even if availment had mattered, the Revenue had not proved it: no return, assessment or statement of three of the four contractors was on record (para 38). The Tribunal distinguished Gujarat State Petronet Ltd. v. CCE, Ahmedabad, a coordinate Bench decision, on the grounds that the contractors there had admittedly availed the notification on the very pipes, that the recipient was a service provider whose claim failed independently, and that it predated Larsen & Toubro. It expressly left open whether the Explanation would deny credit to a recipient where the provider availed a conditional exemption on goods sold under a contract that is not a works contract (para 39).
3.4 Limitation, interest and penalty
Although the merits disposed of both demands, the Tribunal recorded a finding on limitation. Applying Anand Nishikawa Co. Ltd. v. CCE, Meerut, suppression requires deliberate non-disclosure of correct information to evade duty. The appellant took credit on duty-paying invoices naming it as consignee, recorded it in statutory records and reflected it in returns, . The Metec statement showed “at most, what that contractor did”. In Gujarat State Petronet itself the Tribunal denied credit but declined the extended period because the issue was doubtful, and the Gujarat High Court did not interfere. The Revenue could not rely on that case to deny credit and treat the contrary view as a device to evade duty (paras 45 and 46). Interest and penalty fell with the demand (para 47).
3.5 Limits and survival
Three limits stand out. First, the Tribunal did not decide whether every item, such as steel channels, answers the description of capital goods, because the notice did not raise the point and the Revenue cannot travel beyond the notice (para 26). Second, the decision concerns the Credit Rules, which were replaced by the Central Goods and Services Tax Act, 2017. Credit under that Act turns on Section 16 and the blocked-credit provisions of Section 17(5), which the Tribunal did not construe.
As to amendment, the Tribunal traced the substitution of Rule 2(k) from 1 April 2011 and found nothing material to the claim (para 28). Its reasoning is tied to provisions closed for the period in suit; for later years or for GST the question must be analysed afresh.
4. Practical significance
Credit positions. Manufacturers holding capital goods credit on equipment received through contractors, where the invoice names the factory as consignee, now have authority resting on receipt and use in the factory rather than ownership. Pending matters should be supported by duty-paying invoices, records and evidence of use.
Defending a works contract allegation. Disputing that the arrangement is a works contract is no longer the only line of defence. A taxpayer may accept composite characterisation and still succeed by showing that the Explanation to Rule 3 needs an actual exemption on condition, that the goods value was outside the levy, and that Explanation 2 to Rule 2A addresses only the provider. Counsel should insist that the Revenue identify the rule or notification, the contractor’s claim to it, and the proof.
Burden of proof. The Tribunal said that a taxpayer “need not justify the commercial form of its contracts” and that the Revenue must establish the facts attracting a statutory bar. That helps against notices resting on one third-party statement (para 42).
Contract and invoicing practice. Paperwork does not create separate contracts. A letter of intent fixing one price, incorporated in both orders, will be read as one bargain. Parties wanting separate agreements should give supply and installation their own prices, schedules and completion triggers.
Audit and proceedings. The Tribunal said an authority declining to follow a decision cited before it “owes the assessee, and the appellate forum, the reason”, which supports challenging orders that dismiss precedent as “not exactly identical” (para 42).
Remedy and strategy. Limitation should be pleaded in the alternative, since the Tribunal examined it after the merits. Because the Tribunal left open sale-plus-installation structures, and a Bench elsewhere following Gujarat State Petronet more closely would not be bound by this order, the result should not be overstated.
5. Conclusion
Toshiba JSW Power Systems is a careful decision on a recurring dispute. It accepts the Revenue’s description of the contracts, rejects the Revenue’s conclusion, and reaches that result through the structure of the Credit Rules rather than a view that the contracts were separate. The Rules ask whether capital goods were received and used in the factory, not who owned them on arrival; excisability of a plant is a question for its maker; and the Explanation to Rule 3 bites only where an exemption on condition exists, has been claimed, and operates against the claimant.
Its strength lies in the “no levy, no exemption” step. The finding on the passing of property is hedged and unnecessary to the result, and the reservation on non-works-contract structures leaves a gap in which the Department may continue to litigate.
For practitioners, the order offers a clear sequence of argument in legacy credit disputes: establish receipt and use, resist the importation of conditions from the contractor’s treatment, require proof of availment, and plead limitation. It is not a template for credit under the Central Goods and Services Tax Act, 2017. Any appeal by the Revenue is the development to watch.
Authorities
Authorities applied or relied on by the Tribunal
| Authority | How it appears in the order | Source |
|---|---|---|
| State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., AIR 1958 SC 560 | Building contract as one indivisible contract (para 15) | https://indiankanoon.org/doc/191638207/ |
| Builders’ Association of India v. Union of India, (1989) 2 SCC 645 | Power of States to tax transfer of property in goods in a works contract (para 15) | https://indiankanoon.org/doc/191638207/ |
| Larsen & Toubro Ltd. v. State of Karnataka, (2014) 1 SCC 708 = 2014 (34) S.T.R. 481 (S.C.) | Goods in some other form; separate agreements (paras 15, 18, 20, 21, 23) | https://indiankanoon.org/doc/191638207/ |
| Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu, (2014) 7 SCC 1 | Composite supply and installation is a works contract (paras 15, 18) | https://indiankanoon.org/doc/191638207/ |
| Aristo Printers Pvt. Ltd. v. Commissioner of Trade Tax, Lucknow, 2025 INSC 1188 | Incorporation and property in goods (paras 15, 21) | https://indiankanoon.org/doc/191638207/ |
| Gannon Dunkerley and Co. v. State of Rajasthan, (1993) 1 SCC 364 | Property passes on incorporation (para 21) | https://indiankanoon.org/doc/191638207/ |
| CCE v. Larsen & Toubro Ltd., 2015 (39) S.T.R. 913 (S.C.) | No levy, no exemption (paras 15, 35, 39) | https://indiankanoon.org/doc/191638207/ |
| Commissioner of Customs, Central Excise and Service Tax, Noida v. Interarch Building Products Pvt. Ltd., 2023 (73) G.S.T.L. 433 (S.C.) | Rule 2A and the composition scheme (paras 34, 35, 40) | https://indiankanoon.org/doc/191638207/ |
| Sarvesh Refractories (P) Ltd. v. CCE & C, 2007 (218) E.L.T. 488 (S.C.) and CCE & C v. MDS Switchgear Ltd., 2008 (229) E.L.T. 485 (S.C.) | Recipient cannot disturb supplier’s classification or duty determination (para 34) | https://indiankanoon.org/doc/191638207/ |
| CCE v. Sunrise Chemical Industries, 2010 (262) E.L.T. 110 (Guj.) | No requirement of ownership or installation (para 28) | https://indiankanoon.org/doc/191638207/ |
| CCE, Jalandhar v. International Tractors Ltd., 2010 (255) E.L.T. 196 (P&H); CCE, Chandigarh v. Ambuja Cement Ltd., 2022 (382) E.L.T. 166 (S.C.) | Receipt through contractor; integration into factory (para 28) | https://indiankanoon.org/doc/191638207/ |
| Bharti Airtel Ltd. v. Commissioner of Central Excise, Pune, 2024 INSC 880 | Accessories of capital goods; eligibility on goods as received (paras 28, 31) | https://indiankanoon.org/doc/191638207/ |
| Gujarat State Petronet Ltd. v. CCE, Ahmedabad, 2013 (32) S.T.R. 510 (Tri.-Ahmd.); CCE, Ahmedabad III v. Gujarat State Petronet Ltd., 2014 (34) S.T.R. 321 (Guj.) | Distinguished on merits; relied on for limitation (paras 39, 46) | https://indiankanoon.org/doc/191638207/ |
| Ramky Infrastructure Ltd. v. CST, Hyderabad, 2013 (29) S.T.R. 33 (Tri.-Bang.) | Characterisation of EPC contracts; credit restriction limited to the contractor (paras 15, 37, 40) | https://indiankanoon.org/doc/191638207/ |
| The India Cements Ltd. v. Commissioner of GST and Central Excise, Tirunelveli, Final Order No. 41010/2026 dated 8 September 2026 (CESTAT Chennai) | Distinguished (para 32) | https://indiankanoon.org/doc/191638207/ |
| Anand Nishikawa Co. Ltd. v. CCE, Meerut, 2005 (188) E.L.T. 149 (S.C.) | Meaning of suppression (para 45) | https://indiankanoon.org/doc/191638207/ |
| G.R. Infra Projects Ltd. v. State of Madhya Pradesh, Civil Appeal No. 11277 of 2026 (S.C., 19 August 2026) | Contents of a valid notice; cited under the CGST Act (para 45) | https://indiankanoon.org/doc/191638207/ |
| Commissioner of Customs v. Toyo Engineering India Ltd., (2006) 7 SCC 592; CCE v. Shital International, 2010 (259) E.L.T. 165 (S.C.) | Revenue cannot travel beyond the notice (para 26) | https://indiankanoon.org/doc/191638207/ |
| South Eastern Coalfields Ltd. v. S. Kumar’s Associates AKM (JV), AIR 2021 SC 3540 | Binding effect of a letter of intent (para 19) | https://indiankanoon.org/doc/191638207/ |
Authorities cited by counsel and not separately applied
| Authority | Citation | Source |
|---|---|---|
| CCE, Ludhiana v. Pepsi Foods Ltd. (P&H) | 2010 (254) E.L.T. 284 | https://indiankanoon.org/doc/191638207/ |
| CCE v. The India Cements Ltd.; Dalmia Cements (Bharat) Ltd. v. CESTAT; Tamilnadu Newsprint and Papers Ltd. v. CCE (Madras High Court) | 2020 (9) TMI 1158; 2021 (3) TMI 179 | https://indiankanoon.org/doc/191638207/ |
| Bannari Amman Sugars Ltd. v. CCE, Mysore (Kar.) | 2010 (250) E.L.T. 326 | https://indiankanoon.org/doc/191638207/ |
| Tamil Nadu Petro Products Ltd. v. CESTAT | TS-160-HC-2017 (Mad)-EXC | https://indiankanoon.org/doc/191638207/ |
| Uniworth Textiles Ltd. v. CCE, Raipur | 2013 (288) E.L.T. 161 (S.C.) | https://indiankanoon.org/doc/191638207/ |
| Indian Oil Petronas v. Commissioner of GST & Central Excise, Chennai (CESTAT Chennai) | 2025 (12) TMI 944 | https://indiankanoon.org/doc/191638207/ |
| Collector of Central Excise v. H.M.M. Ltd. (S.C.) | 1995 (76) E.L.T. 497 | https://indiankanoon.org/doc/191638207/ |
Legislation, rules and notifications
| Instrument | Provisions | Source |
|---|---|---|
| CENVAT Credit Rules, 2004 | Rules 2(a), 2(h), 2(k), 3(1), the Explanation to Rule 3, Rules 4(2), 6, 9, 14, 15 | https://www.indiacode.nic.in/ |
| Central Excise Act, 1944 | Sections 11A(1) proviso, 11A(4), 11AC, 37B | https://www.indiacode.nic.in/ |
| Finance Act, 1994 | Sections 65(105)(zzzza), 66E(h), 93, 94(2)(aa) | https://www.indiacode.nic.in/ |
| Service Tax (Determination of Value) Rules, 2006 | Rule 2A and Explanation 2 | https://www.indiacode.nic.in/ |
| Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 | Rule 3(2) | https://www.indiacode.nic.in/ |
| Notification No. 12/2003-ST dated 20 June 2003; Notification No. 34/2012-ST dated 20 June 2012; Notification No. 3/2011-CE (NT) dated 1 March 2011; Board’s Order No. 58/1/2002-CX dated 15 January 2002 | Exemption, rescission, amendment of Rule 2(k), and excisability of turnkey plant | https://www.indiacode.nic.in/ |
| Constitution of India | Article 366(29A)(b) | https://www.indiacode.nic.in/ |
| Central Goods and Services Tax Act, 2017 | Sections 16 and 17(5) (mentioned only to mark the end of the regime) | https://www.indiacode.nic.in/ |
Order
Toshiba JSW Power Systems (P) Ltd. v. Commissioner of GST and Central Excise, Excise Appeal Nos. 40612 and 40613 of 2018, Final Order Nos. 41071-41072/2026, decided 9 October 2026, CESTAT Regional Bench, Chennai: https://indiankanoon.org/doc/191638207/
FAQ
Can a manufacturer take CENVAT credit on capital goods supplied by a contractor under an EPC works contract? On this order, yes, for September 2010 to March 2016, where the goods are capital goods under Rule 2(a)(A), duty was paid on them, and they were received and used in the manufacturer’s factory for making dutiable final products. Ownership at the point of receipt is not a condition.
Does the Explanation to Rule 3 of the CENVAT Credit Rules, 2004 bar the recipient’s credit where the contractor valued its services under Rule 2A? Not on this order. The Tribunal held that the value of goods transferred in a works contract lies outside the levy of service tax, so no exemption of it can be an exemption on condition within the Explanation, and that Explanation 2 to Rule 2A binds only the provider.
Does the decision apply to input tax credit under GST? The order does not decide any question under the Central Goods and Services Tax Act, 2017. Credit under that Act, including the blocked-credit provisions, rests on a different statutory text and must be analysed separately.
This article is not legal advice and does not create an attorney–client relationship. Readers should verify the certified copy of the judgment and any subsequent clarificatory orders before relying on it, and consult a qualified advocate on the facts of their matter.