Case Law Details
Arihant Tradelinks India Private Limited Vs C.C.E., Kutch (Gandhidham) (CESTAT Ahmedabad)
Conclusion: In present facts of the case, the Hon’ble Tribunal held that limitation period could not be invoked as the issue involved is purely of interpretation of Cenvat Credit Rules, levy of CVD in terms of Customs Tariff Act, therefore malafide intention cannot be attributed to the appellant.
Facts: The brief facts of the case are that the appellants have availed Cenvat credit of CVD paid on input namely, coal of various types either directly imported by the appellant or purchased from other importers. The import documents in respect of such coal indicate that CVD @ 2% was paid in terms of Customs Notification No. 12/2012-Cus dated 17.03.2012 (as amended) and accordingly, appellants have paid CVD @ 2% and availed Cenvat credit thereof. The appellants were issued show cause notices to deny credit, as the appellant has not paid duty at the Central Excise tariff rates and have paid duty less than that, as per Customs Notification No. 12/2012-Cus, appellant were not eligible for Cenvat credit. The Adjudicating Authorities, vide impugned orders confirmed the demand of Cenvat credit availed by the appellant and also imposed equal penalty. Therefore the present appeals filed by the appellants.
After taking into consideration of submissions from both sides, the Hon’ble Tribunal observed that specific bar was provided under Rule 3(1)(i)(a) and (b) for availing Cenvat credit in respect of goods exempted from payment of excise duty under Notification No. 1/2011-CE and 12/2012-CE. However, there is no bar provided in respect of CVD paid under Customs Notification No. 12/2012-Cus. For this reason itself, the Cenvat credit availed by the appellant in respect of CVD cannot be denied. Only on the ground that the appellant have not paid CVD equivalent to the excise duty leviable on the Coal specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via) and applied clause (vii) of Rule 3 of Cenvat Credit Rules. The Revenue‟s contention is incorrect that as per clause (vii) of Rule 3(1) additional duty leviable under Customs Tariff Act is equivalent to duty of excise duty specified under clause (i) of Rule 3(1) is paid.
As per clause (i) of Rule 3(1), the duty of excise specified in the first schedule to the Central Excise Tariff Act, 1985 leviable under the Excise Act. In the present case, there is no dispute that the duty of excise is indeed specified in first schedule of Central Excise Tariff Act, 1985 which is leviable under the Excise Act. It is only by Customs Notification, the concession in rate of duty was provided i.e. @ 2% under Notification No. 12/2012-Cus. Only since the concessional rate is provided under Customs Notification, the nature of excise duty specified in the first schedule to the Central Excise Tariff Act does not get altered. The Adjudicating Authority has ignored the fact that there is not the rate of CVD provided in the Customs Tariff Act and the rate of duty is provided in Central Excise Tariff Act. Therefore, even the 2% which is nothing but a concessional CVD in lieu of excise duty and the same is specified in the first schedule of Central Excise Tariff Act. Therefore, whenever CVD is paid, it flows from the Central Excise Tariff Act and not from the Customs Tariff Act and is not as per the duty specified in the Customs Tariff Act. Therefore, the entire basis of the interpretation made by the Adjudicating Authority regarding levy of CVD is erroneous and on that basis, the case of the department does not sustain.
On the issue of limitation, the Hon’ble Tribunal held that the issue involved is purely of interpretation of Cenvat Credit Rules, levy of CVD in terms of Customs Tariff Act. In this situation, malafide intention cannot be attributed to the appellant. The appellant have been declaring availment of Cenvat credit in respect of 2% CVD and the same were reflected in monthly ER-1 returns. Therefore, there is absolutely no suppression of facts or mis-declaration etc. on the part of the appellant. Accordingly, the demand for extended period is not sustainable on the ground of time-bar also.
Accordingly, the appeal of the Appellants were allowed.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellants have availed Cenvat credit of CVD paid on input namely, coal of various types either directly imported by the appellant or purchased from other importers. The import documents in respect of such coal indicate that CVD @ 2% was paid in terms of Customs Notification No. 12/2012-Cus dated 17.03.2012 (as amended) and accordingly, appellants have paid CVD @ 2% and availed Cenvat credit thereof. The appellants were issued show cause notices wherein it was contended that admissibility of Cenvat Credit is governed by the Cenvat Credit Rules 2004. Rule 3(1) of Cenvat Credit Rules, 2004 prescribes some specific types of duties, which are allowed to be eligible as Cenvat Credit. The additional duty of customs is a duty equal to duty of excise for the time being leviable on like article, if produced or manufactured in India. Clause (vii) of sub Rule (1) of Rule 3 of Cenvat Credit Rules, 2004 permits availing Cenvat credit of additional duty leviable under Section 3 of the Customs Tariff Act (commonly known as CVD) subject to the condition that the CVD must be equivalent to the duty of excise specified under clauses (i), (i), (i), (iv), (v), (vi) and (via) of the said rules. The term “equivalent” has greater significance that in any case, if the CVD paid is not equivalent to the duty of excise as specified under clauses (i), (i), (i), (iv). (v), (vi) and (via) of Rule 3(1) of Cenvat Credit Rules, 2004, credit thereof is not allowed to the manufacturer. It was further contended in the show cause notices that appellant is eligible for CVD credit paid is the same which is equal to duty of excise specified under Central Excise Tariff heading 2701 i.e. 5%/6% ad valorem as per Central Excise Tariff Act, 1985. Since the appellant has not paid duty at the Central Excise tariff rates and have paid duty less than that, as per Customs Notification No. 12/2012-Cus, appellant are not eligible for Cenvat credit. The Adjudicating Authorities, vide impugned orders confirmed the demand of Cenvat credit availed by the appellant and also imposed equal penalty. Therefore the present appeals filed by the appellants.
2. Shri Hardik Modh, learned Counsel appearing on behalf of the appellants submit that Section 3 of the Customs Tariff Act, 1975 levies duty equal to the excise duty, sales tax, local tax and other charges on the goods imported into India to off-set the levy of the taxes on the goods manufactured/ sold in India so that the imported goods are also at par in respect of the duty levied on such goods. He submits that mere perusal of Section 3(1) of Customs Tariff Act clearly reveals that Customs Tariff Act levies CVD which is only of Central Excise regime. At the relevant time the imported goods were subject to excise duty at the rate of 6% as per first schedule Central Excise Tariff Act, 1975. The exemption which was a concessional exemption with effective rate of 2% by Customs Notification No. 12/2012-Cus dated 17.03.2012. He submits that relevant entry under the Notification No. 12/2012-Cus is amended from time to time is an unconditional exemption and the appellant was eligible to avail the benefit of the concessional rate of CVD at the rate of 2%. He further submits that Rule 3 of Cenvat Credit Rules, 2004 specifies duties which can be claimed as Cenvat credit by a registered person. As regards the contention of the Revenue that credit of CVD is available only when paid as per tariff rates, he submits that Central Government have powers to levy CVD different than the duty of excise payable on like goods manufactured to counter-balance excise duty. The appellant had paid duty at concessional rate of 2% by relying on the Notification No. 12/2012-Cus which refers Section 3(1) of the Customs Tariff Act and not Section 3(3) of the Customs Tariff Act. He submits that Rule 3(1) restricts the amount paid under Notification No. 12/2012-CE and Notification No. 12/2012-CE issued under the Central Excise regime and not in respect of the notification issued under the Customs regime. Therefore, he submits that there is no restriction in respect of CVD paid under Notification No. 12/2012-Cus. He submits that only because the rate of duty is reduced does not alter the nature of the duty levied on the goods. Further, Cenvat credit was taken as per Rule 3(vii) of Cenvat Credit Rules as CVD was levied as per Section 3(1) of Customs Tariff Act which is equivalent in nature of the excise duty. The effective rate of duty was further reduced by the Notification No. 12/2012-Cus but the nature of the duty was still offset the levy of Central Excise duty. He submits that the issue is no longer res-integra as various benches of the Tribunal, on the same issue has allowed Cenvat credit in respect of concessional CVD paid under Notification No. 12/2012-Cus
3. He further submits that demand is clearly time-barred as the extended period of limitation was invoked. The issue relates to the interpretation of Cenvat provisions and Customs Tariff Act and for the same issue, various cases were booked by the department which is evident from the judgments given on the same issue. Therefore, no malafide intention or suppression of facts with intention to evade duty is attributable to the appellants. The availment of Cenvat credit having been declared in the monthly ER-1 returns, appellant have not mis-declared or suppressed any fact from the department. Therefore, the demand for the extended period is clearly time-barred. In support of merits of the case as well as time-bar, he placed reliance on the following judgments:-
(a) Hindalco Industries Limited v/s. GST, Bhopal – 2018 (363) ELT 1085 (Tri-Delhi)
(b) Lonsenkiri Chemicals Industries vs. C.C.E, Cus & ST, Vadodara – 2019 (365) ELT 22 (Guj.)
(c) Commissioner vs. Meghmani Dyes & Intermediates Limited – 2013 (288) ELT 514 (Guj.)
(d) Commissioner of CE vs. Pragathi Concrete Products (P) Limited – 2015 (322) ELT 819 (SC).
(e) Simplex Infrastructures Limited vs. CST, Kolkata – 2016-TIOL-779-HC-KOL-ST
(f) Delhi International Airport Limited vs. Commissioner of CGST – 2019 (24) GSTL 403 (Tri.)
(g) Binjrajka Steel Tubes Limited vs. CCE – 2016 (342) ELT 302 (Tri.)
(h) CCE & ST, Surat vs. Aarti Industries Limited – Final Order No. A/10390/2019 dated 22.02.2019
(i) Asahi Songwon Colors Limited vs. Commissioner of Central Excise & ST., Vadodara – Final Order No. A/11585/2018 dated 09.07.2018
4. On the other hand, Shri Ghanshyam Soni, learned Joint Commissioner (AR) and Shri Vinod Lukose, learned Superintendent (AR) appeared on behalf of the appellants. They reiterates the findings of the impugned orders and also argued on the written submission filed on 15.07.2021. The Revenue also placed reliance on the following judgments:-
(a) 2015 (318) ELT 3 (SC)- Aidek Tourism Services P. Limited vs. CC, New Delhi
(b) 2019 (365) ELT 22 (Guj) – Lonsenkiri Chemicals Industries vs. CCE, Vadodara-l
(c) 2002 (139) ELT 3 (SC) – CCE, Vadodara vs. Dhiren Chemical Industries.
(d) 2020 (36) GSTL 3 (SC) – State of Andhra Pradesh vs. Linde India Limited
5. We have carefully considered the submissions made by both the sides and perused the record. We find that appellant have availed Cenvat credit in respect of 2% CVD paid as per Notification No. 12/2012-Cus. Specific bar was provided under Rule 3(1)(i)(a) and (b) for availing Cenvat credit in respect of goods exempted from payment of excise duty under Notification No. 1/2011-CE and 12/2012-CE. However, there is no bar provided in respect of CVD paid under Customs Notification No. 12/2012-Cus. For this reason itself, the Cenvat credit availed by the appellant in respect of CVD cannot be denied. We find that Revenue has disallowed Cenvat credit to the appellants in respect of CVD paid on imported Coal at the rate of 2% in terms of Notification No. 12/2012-Cus dated 17.03.2012. Only on the ground that the appellant have not paid CVD equivalent to the excise duty leviable on the Coal specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via) and applied clause (vii) of Rule 3 of Cenvat Credit Rules. The Revenue‟s contention is incorrect that as per clause (vii) of Rule 3(1) additional duty leviable under Customs Tariff Act is equivalent to duty of excise duty specified under clause (i) of Rule 3(1) is paid. Rule 3 of the Cenvat Credit Rules, 2004 is reproduced as under:-
Rule -3
(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act :
PROVIDED that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods –
(a) in respect of which the benefit of an exemption under Notification No. 1/2011-CE, dated the 1st March, 2011 is availed; or
(b) specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012-CE, dated the 17th March, 2012 is availed;
……… ………
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) [, (vi) and (via)]:
(viii) ….. “
6. We find that in terms of clause (vii) of Rule 3(i) of Cenvat Credit Rules, Cenvat credit is allowed in respect of the additional duty leviable under Section 3 of Customs Tariff Act, 1975 equivalent to the duty of excise specified under clause (i). As per clause (i) of Rule 3(1), the duty of excise specified in the first schedule to the Central Excise Tariff Act, 1985 leviable under the Excise Act. In the present case, there is no dispute that the duty of excise is indeed specified in first schedule of Central Excise Tariff Act, 1985 which is leviable under the Excise Act. It is only by Customs Notification, the concession in rate of duty was provided i.e. @ 2% under Notification No. 12/2012-Cus. Only since the concessional rate is provided under Customs Notification, the nature of excise duty specified in the first schedule to the Central Excise Tariff Act does not get altered. The Adjudicating Authority has ignored the fact that there is not the rate of CVD provided in the Customs Tariff Act and the rate of duty is provided in Central Excise Tariff Act. Therefore, in our view, even the 2% which is nothing but a concessional CVD in lieu of excise duty and the same is specified in the first schedule of Central Excise Tariff Act. Therefore, whenever CVD is paid, it flows from the Central Excise Tariff Act and not from the Customs Tariff Act and is not as per the duty specified in the Customs Tariff Act. Therefore, the entire basis of the interpretation made by the Adjudicating Authority regarding levy of CVD is erroneous and on that basis, the case of the department does not sustain. A very identical issue has come up in various cases before this Tribunal and this Tribunal has taken consistent view that Cenvat credit in respect of 2% concessional CVD paid on Coal is admissible. The direct judgment on the issue which considered various earlier decisions is reproduced below:-
Hindustan Zinc Limited vs. Commissioner of CGST, Udaipur – FINAL ORDER No. 50855-50856 / 2020
1 to 8 … ….. …….. …….
“9. It is not in dispute that both Hindustan Zinc and Ultratech Cement paid additional duty of Customs under section 3 (1) of the Customs Tariff Act, after availing the benefit of the Customs Notification dated March 17, 2012 and that they also availed CENVAT credit of the additional duty of customs so paid under rule 3(1)(vii) of the CENVAT Credit Rules. This availment of CENVAT credit has been denied to them for the reason that the additional duty of customs paid @ 2% was not the duty of excise as specified in the Excise Tariff Act and so CENVAT credit of the additional duty of customs paid under the Customs Notification dated March 17, 2012 have been wrongly availed.
10. It would, therefore, be appropriate to reproduce the relevant portion of the show cause notice issued by the Department to Hindustan Zinc, and the same is reproduced below:
11. “Whereas, from the above, it transpires that the Cenvat credit on the coal imported by the assessee is available to the manufacturer under Cenvat Credit Rules, 2004 subject to the satisfaction of the conditions laid in Rule 3 of the Cenvat Credit Rules, 2004. The rule 3(1)(i) of Cenvat Credit Rules, 2004 speaks that the Cenvat Credit of duty of excise as specified in the first schedule to the Central Excise Tariff Act, 1985 read with any Notification issued under the Central Excise Act, 1944 is available to the assessee. Further, from the legal provisions as contained in Rule 3(1)(vii) of the Cenvat Credit Rules, 2004, it transpires that the assessee is eligible to take Cenvat Credit of the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 equivalent to the duty of excise specified under clauses (i), (ii), (viii), (iv), (v), (vi), (vii) and (viia) of the Rule 3 ibid. The duty of excise on the coal imported by the assessee as specified in the first schedule to the Central Excise Tariff Act, 1985 is 6% and the effective rate is 1% or 2% vide Notification No. 12/2012-CE dated 17.03.2012, as amended, subject to the condition stated therein. In this case, 2% Additional Duty on imported steam coal/bituminous coal as per Notification No. 12/2012-Cus dated 17.03.2012 as amended by Notification No. 12/2013-Cus dated 01.03.2013 has been paid by the assessee. Further, it is found that the said duty of 2% is not specified under Central Excise Tariff Act, 1985 read with any notification issued under Central Excise Act, 1944 or rules made there under, therefore the credit of said duty of 2% paid as Additional Duty of customs does not appear to be admissible to them.
12. From the above, it appears that the assessee has wrongly availed total Cenvat credit amounting to Rs. 2,75,97,106/- (As per Annexure „A‟) in contravention of the provisions of Rule 3 of Cenvat Credit Rules, 2004. The said wrongly availed Cenvat credit, which was otherwise not admissible to them, is liable to be recovered from the assessee along with interest under rule 14 of Cenvat Credit Rules, 2004 read with Section 11A(4) and Section 11AA of the Central Excise Act, 1944 and Section 174 of the Central Goods and Service Tax Act, 2017.”
11. The Commissioner has, by the impugned order, not accepted the explanation offered by Hindustan Zinc for the following reasons:
25. “The notices have basically contended that they rightly availed Cenvat credit of the additional duty of customs paid @ 2% in terms of S. No. 122A or 123 of Notfn. No. 12/2012- Customs dated March 17, 2012, as amended by Notfn. No. 12/2013-Cus dated March 1,2013, as there is no such restriction or barring of credit in rule 3(1)(vii) similar to the restriction or barring in rule 3(1)(i)(b) of CCR, 2004. Their contention is that they have taken credit of CVD as applicable under S.No.122A or 123 of Notfn. No. 12/2012- Customs dated March 17, 2012, and not S. No. 67 of notification 12/2012-CE dated 17.03.2012. I do not agree with their contention because of the specific wording of the clause (i) and (vii) of sub rule 3(1) of CCR, 2004.
From the perusal of the said sub rule it is clear that credit of the CVD paid by assessee is admissible as Cenvat credit. However, such right to availment of credit is no unfettered. The said credit available is equivalent to the duty of Excise specified under clauses (i), (ii), (viii), (iv), (v), (vi), (vii) and (via). The wording of this clause clearly specifies that it allows the credit only of the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of Excise specified under clauses (i), (ii), (viii), (iv), (v), (vi), (vii) and (via). Clause (vii) is not independent of clause(i) and thus the proviso provided under clause (i) is also applicable to credit of CVD under clause (vii). If there was any other intention of Legislature they would not have specifically mentioned “equivalent to the duty of Excise specified under clauses (i), (ii), (viii), (iv), (v), (vi), (vii) and (via)”. Thus, the notices are not legible to avail the credit of CVD equivalent to duty of excise if it is not eligible in clause (i).
Any other meaning would be unfair for the local coal producers vis a vis imported coal, as if stand taken by notices is accepted, credit would not be available on indigenously procured coal but would be available on imported coal. This could never be the intention of legislature and therefore I do not find any substance or basis in the contention of the notices.”
12. It would be appropriate to reproduce rule 3 of the CENVAT Credit Rules and it is as follows:
“RULE 3. CENVAT credit- (1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –
(i) The duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act:
Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods-
(a) in respect of which the benefit of an exemption under Notification No. 1/2011-C.E., dated the 1st March, 2011 is availed; or
(b) specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012-C.E., dated the 17th March, 2012 is availed.
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act; ;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978); ;
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); ;
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); ;
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via):”
******
13. A bare perusal of rule 3(1)(i) indicates that a provider of output service shall be allowed to take CENVAT credit of the duty of excise specified in the First Schedule to the Excise Tariff Act specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act subject to the two conditions mentioned in proviso (a) & (b). However, rule 3(1)(vii) provides that a provider of output service shall be allowed to take credit of the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via).
14. The Commissioner has mixed up rule 3(1)(i) and rule 3(1)(vii) of rule 3 of the CENVAT Credit Rules. It is for this reason that the conditions specified in rule 3(1)(i) have also been imported into rule 3 (1)(vii) of the CENVAT Credit Rules. In the first instance, Hindustan Zinc had not paid duty of excise specified in the First Schedule of the Excise Tariff Act, nor it had availed the benefit of the Central Excise Notification dated March 1, 2011 or that specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Central Excise Notification dated March 17, 2012 had been availed. In fact, Hindustan Zinc had paid additional duty of customs by availing the benefit under serial number 122A/123 of the Customs Notification dated March 17, 2012. It is because of this misreading of rule 3(1) of the CENVAT Credit Rules that led the Commissioner to commit an error.
15. The Regional Advisory Committee of Hyderabad Zone, in its meeting held on February 9, 2015 considered this very issue at point No. 1 and concluded that CENVAT credit of additional duty of customs paid on imported goods under Customs Notification dated March 17, 2013 (and not under Central Excise Notification) is available for credit. The relevant portion of the minutes is reproduced below:
“MINUTES OF THE MEETING OF THE REGIONAL ADVISORY COMMITTEE, HYDERABAD ZONE HELD ON FEBRUARY 09, 2015.
Point No. 1 – Credit on imported coal:-
Many manufactures are importing steam coal on payment of duties. As per Customs Notification No. 12/2012-Cus. They are availing concessional CVD @ 2%. Audit is of the view that since CVD has been paid @ 2% on imported coal, the credit under Cenvat Credit Rules, is not available. Audit is taking a view that CVD in lieu of Excise duty and if 2% duty has been paid on imports the credit is not admissible because a manufacturer who is procuring coal domestically where excise duty has been paid @ 2%, the credit is not available.
Board has issued a circular No.41/2013-Cus. dated 21.10.2013 where it has been clarified that 2% of CVD is “general applied” rate and therefore it is industry‟s view that credit of CVD is available as per rule 3(1) (vii) of CENVAT credit rules. Please clarify.
Reply:
Since the subject goods were levied at reduced rate of 2% CVD on their importation in terms of section 3 of Customs Tariff Act, 1975 read with Notification issued therein i.e under Notification No. 12/2012-Cus. dated March 17, 2013 (and not under Notification No. 1/2011 CE) which was not excluded from the purview of Rule 3 of CENVAT credit rules, 2004, it appears that the CENVAT credit of CVD paid on imported coal (i.e. 2% adv.) under Notification No. 12/2012-Cus. dated 17.03.2013 is eligible for credit.”
16. A Division Bench of the Tribunal in Hindalco Industries Ltd. considered this precise issue and held that if additional duty of customs has been paid after taking into consideration the Customs Notification dated March 17, 2012, there would be no bar for availment of CENVAT credit in terms of rule 3(vii) of the CENVAT Credit Rules. The relevant paragraph of the decision is reproduced below:
“5 On careful consideration of the submissions made by both the sides, I find that the sole reason to deny Cenvat credit to the appellant is that the authorities below has taken into consideration Notification No. 12/2012-CE., dated 17-3-2012. The authorities below have not considering the Notification No. 12/2012-CE., dated 17-3-2012. If same is taken into consideration and duty paid under the said notification, there is no bar for availment of cenvat credit in terms of Rule 3 (vii) of Cenvat Credit Rules, 2004. Therefore, I hold that authorities below has applied wrong provision to deny Cenvat credit to the appellant. Therefore, Cenvat credit cannot be denied to the appellant. In that circumstances, I hold that the appellant has correctly availed the Cenvat credit of CVD paid on imported coal in terms of Rule 3(7) of Cenvat Credit Rules, 2004. Further, I find that the show cause notice has been issued by invoking extended period of limitation. As the Revenue itself has applied wrong provisions of law, therefore, the extended period of limitation is not invokable. In that circumstances, the impugned order is set aside.”
17. This decision of the Tribunal was subsequently followed by the Tribunal in Jaypee Sidhi Cement Plant and the relevant portion of the decision is reproduced below :
“4. It is submitted on behalf of the appellant that adjudicating authority below has wrongly made applicable the Notification No. 12/2012-C.E., dated 17-3-2012 to the facts and circumstances on a wrong presumption that the levy of CVD in dispute is since equal to the Excise duty leviable on the similar goods and manufactured in India, that the benefit of Customs Notification No. 12/12 has wrongly been denied vide Order. Learned Counsel has relied upon the decision of this Tribunal in the case of M/s. Hindalco Industries Ltd. vs. GST, Bhopal as was pronounced in Appeal No. E/50179/2018-SM vide Final Order No. 50876/2018, dated 8-3-2018 [2018 (363) E.L.T. 1085 (Tri.-Del.)]. Reliance has also been placed on another decision of the Tribunal in the case of Asahi Songwon Colors Ltd. v. CCE & ST, Vadodara Appeal No. E/10635/2017-SM vide Final Order No. A/11585/2018 (Ahmd.), dated 9-7-2018. Therefore, the order in challenge is prayed to be set aside and appeal is prayed to be allowed.
5. Learned Departmental Representative justified the orders.
6. After hearing both the parties and perusing the record, we are of the opinion as follows:
It is admitted that the appellants have imported coal consequent thereto they have paid 1%/2% on CVD in addition to Basic customs duty. The CVD has been paid at the said exempted rate taking the benefit of Sl. No. 123 of Customs Notification No. 12/2012-Cus., dated 17-3-2012. It is apparent from the order in challenge that Department has denied the payment of CVD on exempted rate and the availment of Cenvat credit thereupon relying upon the S. No. 67 of Excise Notification No. 12/2012, dated 17-3-2012.
7. Perusal of both these notifications reveal that the Customs notification is applicable to the imported coal whereas the Excise Notification is applicable to the domestically manufactured goods. The Condition No. 25 of Excise notification which denies availment of Cenvat credit on imports of coal manufactured by the supplier of coal, as has been taken the basis in the order-in-original, shall therefore be applicable for domestically manufactured goods only and not on the imported coal. Perusal of Excise Notification No. 67 further reveals that no such condition is applicable in case of import of coal.
8. The narrow compass of the adjudication, therefore, remains as to whether under Customs notification against S. No. 67 i.e., while importing the coal, the appellants were entitled to avail the Cenvat credit on the amount of CVD paid. The Cenvat credit is applicable as per Rule 3(1) of the Cenvat Credit Rules, 2004. Clause 7 thereof entitles the appellants to avail the Cenvat credit in the given circumstances.
The said Rule itself clarifies that the Cenvat credit of duty of excise is not allowed to be taken when paid on any goods specified under S. Nos. 67 and 128 of Excise Notification No. 12/2012, dated 17-3-2012. Admittedly, the notification relied upon by the department for denying the impugned benefit to the appellant is Customs Notification No. 12/2012, dated 17-3-2012. The restriction of Rule 3 is not applicable to the said notification. Above all, the Hon’ble Supreme Court in the case of SRF Ltd. v. CC Chennai (2015 (318) E.L.T. 607 (S.C.)) has held that Excise Notification No. 12/2012 is applicable only in respect of any digged or manufactured coal and not in respect of imported coal. The import whereof is allowed to have exempted rate of CVD vide Customs Notification No. 12/2012-Cus.
9. In view of the entire above discussion, we are of the firm opinion that the adjudicating authority has committed a legal error while denying the benefit of reduced CVD on imported coal while placing reliance upon the Excise notification for manufacture of coal.” (emphasis supplied)
18. The same view was taken by the Tribunal in Asahi Songwon Colors and the relevant paragraph is reproduced below:
“From the above Rule, it is observed that even if any duty is paid by availing exemption Notification No. 12. 2012-CE dated 17.03.2012, the same will not be available as Cenvat credit for the user of the goods. In the present case, admittedly, the appellant have imported Coal and CVD of 2% is leviable in terms of Customs Notification No. 12/2012-Cus. There is no restriction provided in Rule 3 as regards duty paid under Customs notification. This restriction is applicable only in case of indigenous goods on which the excise duty @ 2% was paid availing Notification No. 12/2012-CE, which is not a case here. Therefore, the appellant is entitled for Cenvat credit in respect of CVD paid under Notification No. 12/2012-Cus.Moreover, since the Notification No. 12/2012-CE is applicable only in respect of indigenously manufactured coal and not in respect the imported coal as held by the Hob’ble Supreme Court in the case SRF Limited vs. CC, Chennai- 2015 (318) ELT 607 (SC). Therefore, even if the importer wants to avail the exemption of Notification No. 12/2012-CE for payment of CVD, the same will not be available to the importer. Therefore, in any case, in the case of import the Notification No. 12/2012-CE is not relevant.”
19. Learned Authorized Representative of the Department has, however, placed reliance upon the decision of the Gujarat High Court in Lonsenkiri Chemicals Industries.
20. This decision is clearly distinguishable on facts. The appellant therein had availed the benefit of serial numbers 67 and 128 of the Central Excise Notification dated March 17, 2012. It is for this reason that the High Court held that because of the condition set out in proviso (b) of rule 3(1)(i) of the CENVAT Credit Rules that the appellant would not be entitled to avail CENVAT credit. The relevant portion of the judgment of Gujarat High Court is reproduced below:
“2. The appellant imports coal on which ordinarily countervailing duty in the nature of excise duty would be payable. However, by virtue of notifications 1 of 2011 dated 01.03.2011 and Sr. No. 67 and 128 of exemption notification 12 of 2012 dated 17.03.2012, the assessee would either pay duty at the reduced rate or Nil rate of duty. In this context, the question of allowing the assessee to claim CENVAT credit arose. The Revenue authorities and the Tribunal held that by virtue of proviso to rule 3(1) of CENVAT credit Rules, 2004, („the Rules‟ for short) in view of the benefit availed by the assessee and the said exemption notifications, CENVAT credit would not be allowable. It is this view which the assessee has challenged before us. ********
3. It is not in dispute that the assessee has availed of the benefit of exemption notification 1 of 2011 and also the benefits under Sr. 67 and 128 of exemption notification 12 of 2012. In that view of the matter, the above noted proviso of the Rules, would disentitle the assessee from claiming CENVAT credit. Counsel for the assessee however submitted that this proviso refers to CENVAT credit of “such duty of excise”. In the present case, what the assessee has paid was the countervailing duty. The same may have been computed in terms of excise duty payable on local manufacturers, nevertheless, the same cannot be treated as duty of excise per se. He however candidly a greed that facility for getting CENVAT credit in the case of the present assessee flows from rule 3 of the Rules. As per sub-rule (1) of rule 3, a manufacturer or producer of a final product or a provider of output service would be allowed to take the CENVAT credit on the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act. Sub rule (1) rule 3 which gives the concession of availment of CENVAT credit of the duty paid, also uses the same expression “duty of excise” as is used in the proviso which restricts or limits the right of availment of such facility under certain circumstances. The expression “duty of excise” used in clause (i) of sub-rule (1) of rule 3 and the above noted proviso to the said rule, must receive same interpretation. The term “duty of excise” cannot have different connotations for the purpose of sub-rule (1) of rule 3 and for the purpose of proviso to the rule 3. Thus, if we accept the contention of the counsel for the assessee that the countervailing duty would not be included in the expression “duty of excise” for the purpose of the said rule, the assessee‟s very foundation of claiming the benefit of CENVAT credit would disappear.
21. This decision of the Gujarat High Court in Lonsenkiri Chemicals Industries was also distinguished by the Tribunal in Aarti Industries Limited and the relevant portion is reproduced below:
“As regard, the judgement cited by the Ld. AR in the case of Lonsenkiri Chemicals Industries (supra), I find that in the said case Cenvat Credit was availed on the CVD paid under the Notification No. 12/2012-CE which was barred from availing the Cenvat Credit in terms of Rule 3(1) proviso (a) and (b) whereas in the present case in Rule 3(1) there is no bar provided for CVD paid under Notification No. 12/12-Cus., therefore, the judgement of Hon‟ble High Court in Lonsenkiri Chemicals Industries (supra) is not applicable to the facts of the present case.”
22. The Commissioner, therefore, committed an illegality in denying the benefit of CENVAT credit to Hindustan Zinc.
23. On the other hand, the Commissioner (Appeals), in the matter of Ultratech Cement, after considering the provisions of rule 3 of the CENVAT Credit Rules and the decision of the Tribunal in Hindalco Industries Limited and the Minutes of the Meeting of the Regional Advisory Committee of Hyderabad Zone held on February 9, 2015, held that Ultratech Cement was justified in taking the CENVAT credit. The Commissioner (Appeals) also found that the judgment of the Gujarat High Court in Lonsenkiri Chemicals Industries would not be applicable to the facts of the case and in this connection placed reliance on the decision of the Tribunal in Aarti Industries Limited.
24. For the reasons also discussed above, there is no error in the order passed the Commissioner (Appeals) in the matter of Ultratech Cement.
25. Thus, for all the reasons stated above, Excise Appeal No. 52928 of 2019 filed by Hindustan Zinc is allowed and the order dated September 24, 2019 passed by the Commissioner is set aside. Excise Appeal No. 52774 of 2019 filed by the Commissioner is dismissed.”
7. The above decision of the Tribunal has considered various decisions given by the different benches and also distinguished the decisions relied upon by the Revenue and concluded that the appellant is entitled for Cenvat credit in respect of 2% CVD paid under Notification No. 12/12-Cus.
8. On the issue of limitation, we find that the issue involved is purely of interpretation of Cenvat Credit Rules, levy of CVD in terms of Customs Tariff Act. It is also the fact that on identical issue many cases were made out by the department across the country in respect of different assessees which clearly shows that the issue involved is of interpretation of law. In this situation, malafide intention cannot be attributed to the appellant. The appellant have been declaring availment of Cenvat credit in respect of 2% CVD and the same were reflected in monthly ER-1 returns. Therefore, there is absolutely no suppression of facts or mis-declaration etc. on the part of the appellant. Accordingly, the demand for extended period is not sustainable on the ground of time-bar also.
9. As per our above discussion and findings, supported by Tribunal‟s decision in the case of Hindustan Zinc Limited (supra) and various decisions referred therein, the appellants are eligible for Cenvat credit in respect of 2% CVD paid under Notification No. 12/12-Cus. Accordingly, the impugned orders are set-aside and appeals are allowed with consequential relief, if any, in accordance with law.
(Pronounced in the open court on 14.12.2021)
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