Hon’ble Tribunal in Poly Hose India Pvt. Ltd. V/s Commissioner of Central Excise [2003 (152) ELT 361 (Tribunal)] held that Cenvat credit could be availed even when Additional Custom Duty is paid through DEPB. The order is well balanced and deals with all the relevant points. Off course it can be argued that para 4.3 of the EXIM policy was not pleaded in that case. I am of the view that even when that para 4.3 was pleaded the result would not have been different.
It may be kept in mind that Cenvat Credit under the Central Excise Act is availed as per the law laid down in the Cenvat Credit Rules, 2002.
As per Rule 3 (vi) of the Cenvat Credit Rules, 2002 a manufacture or producer of final products shall be allowed to take credit of the additional duly leviable under Section 3 of the Customs Tariff Act.
As per Rule 7 (c) of the Cenvat Credit Rules, 2002, Cenvat Credit shall be taken by the manufacturer on the basis of a bill of entry.
There is no dispute that under those provisions Cenvat Credit should be allowed to the to the manufacturer even when Additional Duty have been paid through DEPB. When Additional duty has been paid through DEPB, it does amount to payment of duty. Thus under Cenvat Credit Rules credit should be allowed even when duty has been paid through DEPB. These rules are specific rules with respect to applicability and availability of Cenvat Credit and if credit is allowable under these rules, it must be allowed.
There is not any dispute about the fact that under Cenvat Credit Rules credit is available even when duty has been paid through DEPB. The view which favours revenue almost completely relies upon EXIM policy and hence it is necessary to examine the applicability of the EXIM policy to a manufacturer and more specifically to the availment of Cenvat Credit. Export-Import policy is not relevant to the manufacturer of excisable goods. Further, Export-Import policy is not relevant even to the manufacture of goods, which is the subject matter of the Central Excise Act, 1944.
As per the Foreign Trade (Development & Regulation) Act, 1992 under which Exim Policy has been notified and para 2.2 of the Exim Policy make it very clear that such laws are applicable only to the Exporters & Importers of goods. It is clear from these that Exim Policy is not applicable to the manufacturer of goods.
Further it is seen that para 4.3.5 refers to the export benefit that can be availed on the export goods. The heading of para 4.3.5 is “Applicability of Drawback”. The para clearly refers of export benefits, which can be availed when goods are exported under DEPB scheme. The term “CENVAT” used is para 4.3.5 clearly refers to the Cenvat as export benefit in lieu of drawback. The para is not relevant with respect to the goods, which are not “export goods”, and inputs used “not in the production of Export goods”. The above para has no relevance when the product is not being exported or the assessee is claiming no export benefit. Thus when goods are not being exported this para is not applicable and hence on the basis of this para cenvat credit cannot be denied.
The last line of the para have been deleted by the DGFT Notification No.28 (RE-2003)/2002-07, dated 28.01.2004 [2004 (164) ELT E1]. It is submitted that the said notification is clarificatory in nature and hence applicable retrospectively. The deletion of the last line of the para clearly shows that denying Cenvat credit on the basis of that para was not the legislative intention at any point of time.
It has already been submitted that para 4.3.5 of the EXIM Policy does not apply to the goods which are not export goods. It refers specifically to the export goods and export benefit available on export of such export goods. Assuming that such para is applicable to cenvat availability under Central Excise, and then also the credit cannot be denied on the basis of this para. The EXIM Policy have been notified by the Director General of Foreign Trade who have not been authorized to issue directions regarding availability of cenvat. In these circumstances the instructions issued by him is without jurisdiction and null and void ab initio and on the basis of such instructions Cenvat Credit cannot be denied.
It is seen that Exim policy cannot be directly applied on the Central Excise assessee. There are numerous examples where Board has issued notifications, circulars etc to give effect to the provisions of Exim Policy whenever it was required to be applied in the Custom and Central excise proceedings. For example Custom Authorities cannot allow duty free import under licenses under Exim Policy unless there is a specific notification of the Board to allow that. EXIM policy cannot enforced by the Central Excise authority unless until it is made applicable to Central Excise by a notification of the Board. No such notification has been issued by the Board to make such Cenvat credit inapplicable as per para 4.3.5. In view of this para 4.3.5 is not applicable in the Central Excise matters and Cenvat Credit cannot be denied on this ground.
Further it is seen that Cenvat Credit Rules are specific rules under which Cenvat Credit is to be availed. Thus even when there are some inconsistencies with EXIM policy, on the basis of principles of interpretation of statutes Cenvat Credit Rules shall prevail. In view of this I am of the opinion that Cenvat Credit should be allowed even when Additional duty has been paid through DEPB.
(Views expressed are personal views of the author.)
Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on [email protected] , Web: www.rajeshkumar.co.in