Case Law Details
Chettinad Cement Corporation Private Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The case of Chettinad Cement Corporation Private Ltd. vs Commissioner of GST & Central Excise (CESTAT Chennai) revolves around the eligibility of the appellant to avail CENVAT credit of 2% Countervailing Duty (CVD) paid on imported steam coal. Here’s a summary of the key points in the order:
Background:
- The appellant is involved in the manufacture of clinker and cement and is registered with the Central Excise department.
- Steam coal, used by the appellant in the generation of steam/electricity for the manufacturing process, attracted central excise duty at the rate of 5% ad valorem from March 1, 2011, as per Notification no.2/2011 CE dated 1/3/2011.
- A concessional rate of 1% ad valorem was available under Notification no.1/2011 – CE dated 1/3/2011 (Sl. No.28), with the condition that CENVAT credit of Central Excise duty on inputs and service tax on input services should not be availed by the appellant.
- The appellant paid 2% CVD on imported coal under Notification 12/2012 – Cus. dated 17/3/2012 and claimed credit for the same.
- The department contended that the appellant was not eligible for the credit based on the restrictions in Notification 12/2012 – CE.
Proceedings:
- The department issued a Show Cause Notice proposing to demand the allegedly wrongly availed credit, along with interest and penalties.
- The Original Authority confirmed the demand, interest, and penalties, leading the appellant to appeal before the Tribunal.
Arguments: The appellant’s counsel argued that Rule 3 of CENVAT Credit Rules 2004 does not restrict the availment of CENVAT credit of 2% CVD on imported steam coal. The restriction under Rule 3 applies only to the CENVAT credit of duties of excise paid under Notification No.12/2012 CE.
Tribunal’s Decision:
- The Tribunal referred to various decisions, including TNPL vs Commr. of GST & CEX, and held that the issue had been previously considered.
- The Tribunal noted that Rule 3 of CCR 2004 does not impose any bar or restriction on availing credit when the benefit of exemption is availed under the Notification No.12/2012-Cus. dt. 17/3/2012.
- It was emphasized that the restriction in Rule 3 is not applicable to Customs Notification No. 12/2012 but is related to Excise Notification No. 12/2012, which is applicable only to domestically manufactured goods, not imported coal.
- Citing the decision in Hindustan Zinc Ltd., the Tribunal held that the appellant was entitled to avail CENVAT credit on the CVD paid while importing coal.
- Consequently, the Tribunal set aside the impugned order, stating that the demand could not sustain, and the appeal was allowed with consequential relief, if any.
Conclusion: The order concludes by stating that the appellant is eligible to take CENVAT credit of 2% CVD paid on imported steam coal under Notification 12/2012 – Cus. dated 17/3/2012, and the demand, interest, and penalties were set aside. The appeal was allowed with any consequential relief deemed appropriate.
FULL TEXT OF THE CESTAT CHENNAI ORDER
1. Brief facts are that the appellant is engaged in manufacture of clinker and cement and have registered with the Central Excise department. The appellant imported steam coal and used the same in generation of steam / electricity which in turn was used in relation to manufacture of their final products. From 1/3/20 11, steam coal attracts central excise duty at the rate of 5% advalorem vide Notification no.2/2011 CE dated 1/3/2011. However, concessional rate of 1% adv. also was available under Notification no.1/2011 – CE dated 1/3/2011 (Sl. No.28) subject to the condition that CENVAT credit of Central Excise duty paid on inputs and service tax paid on inputs services should not be availed by the appellant. Further, vide Notification no.3/2011 – CE(NT) dated 1/3/2011, a proviso was inserted as clause (i) of Sub Rule (1) of Rule 3 of CENVAT credit Rules 2004 providing that CENVAT credit of the duty of excise paid on any goods availing the benefit of an exemption under Notification No.1/2011 – CE dated 1/3/2011 shall not be allowed. The appellant availed credit of the CVD paid at the time of import of steam coal. The department was of the view that the appellant is not eligible to avail the said credit in view of the embargo under Notification No.12/2012 CE. as provided in Clause (i) of Sub rule (1) of Rule 3 of CCR 2004. Show Cause Notice was issued proposing to demand the wrongly availed credit along with interest and for imposing penalties. After due process of law, the Original Authority confirmed the demand interest and imposed penalties. Aggrieved, the appellant is now before the Tribunal.
2. The Ld. Consultant Shri. Parthasarathy appeared and argued for the appellant. It is submitted that the appellant imported steam coal for use in the generation of electricity which in turn was used in relation to the manufacture of final product namely, cement. With effect from 1/3/2011, the steam coal was subjected to Central Excise duty at 5% adv. vide Notification no.2/2011 CE dated 1/3/2011.. However, concessional rate of 1% adv. (that is excise duty) was available for steam coal as per notification 1/2011 CE dated 1/3/2011 (serial no.88) subject to the condition that such concessional rate of duty shall not apply to goods in respect of which Central Excise duty on inputs or service tax paid on input services has been availed under the provisions of CCR 2004. The appellant paid 2% CVD on imported coal under Notification 12/2012 – Cus. dated 17/3/2012 as amended by Notification 12/2012 – Cus. dated 17/3/2012, and availed credit of the same.
3. The department was of the view that in terms of Rule 3 of CCR 2004, CVD of 2% paid on imported steam coal is not eligible for CENVAT Details of the CENVAT credit availed by the appellant was collected by the department and the present Show Cause Notice has been issued proposing to recover the alleged wrongly availed credit along with interest and for imposing penalties.
4. It is explained by the Ld. Counsel that Rule 3 of CCR 2004 does not restrict availment of CENVAT credit of CVD of 2% paid on steam coal imported and subjected to CVD assessment under the Notification 12/2012 – Cus. dated 17/3/2012 as amended. In fact, Rule 3 of CCR 2004 restricts only the CENVAT credit of duties of excise paid in terms of Notification No.12/2012 CE.
5. The issue stands covered by various decisions as under.
TNPL vs Commr. of GST & CEX, Trichy (2021-10-TMi-CESTAT Chennai)
CCE, Jaipur vs Shree Cements Ltd. Rajasthan (Final Order No: 50630-50633/2022 dated 21.07.2022)
Jaypee Sidhi Cement Plant Vs. Commr. Of GST, Customs & CE (2019-369-fELT-1673)
SRF Limited Vs Commr. Of Customs, Chennai (2015-318-ELT-607-SC)
Shyam steel Industries Ltd. Vs Commr. Of CGST & CEX, Bolpur (2022-382-ELT-366-TRI-Kolkatta)
Commr. Of CGST & CEX Bolpur Vs Shyam Steel Industries Ltd. (2022-382-ELT-329-(CAL).
6. The Ld. Counsel prayed that the appeal may be allowed.
7. The Ld. AR Shri. Harendra Singh Paul appeared and argued for the department. The Ld. AR supported the findings in the impugned order.
8. Heard both sides.
9. The issue is whether the appellant is eligible to take the CENVAT Credit of 2% CVD paid on imported steam coal vide Notification 12/2012 – Cus. dated 17/3/2012. The issue has been considered by the Tribunal in the case of M/s. Tamilnadu News Print and Papers Ltd. Vs. CGST and CE, Trichy 2021 (10 TMI 13 – CESTAT, Chennai). The relevant part of the decision reads as under:
10. From the submissions made by the Ld. Counsel as well as after perusal of the decisions, placed before us, we are of the considered opinion that the issue stands covered by the above decision. The bar to take cenvat credit is only when the benefit of exemption specified at Sl.No.67 and 128 under Notification No.12/2012 CE. is availed. The CCR 2004 does not impose any bar or restriction in availing credit when the benefit of exemption is availed under the Notification 12/2012 – Cus. dated 17/3/2012. The issue stands decided in the decision of Hindustan Zinc Ltd. (supra). The relevant paragraphs of said decision are reproduced as under :
“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 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 12/2012 – Cus. 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 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 12/2012 – Cus. dated 17/3/2012. Admittedly, the notification relied upon by the department for denying the impugned benefit to the appellant is Customs Notification 12/2012 – Cus. 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 12/2012 – Cus. dated 17/3/2012
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. Order is therefore, held not sustainable and accordingly, is hereby set aside. Resultantly, the appeal stands allowed.‛
10. Similar view has been taken in the case of Jaypee Sidhi Cement Plant Vs Commissioner of GST, Customs, CE and SRF Ltd. Vs. CC, Chennai (supra).
11. Following the above decisions, we are of the considered opinion that the demand cannot sustain and requires to be set aside. The impugned order is set aside. The appeal is allowed with consequential relief if any.
(Dictated and pronounced in open court)