CESTAT Rejects Cenvat Credit Claim as Amount Was Not Paid Towards CVD

Aculife Healthcare Pvt. Ltd. Vs Commissioner of CGST & Central Excise CGST (CESTAT Ahmedabad)

CESTAT Ahmedabad rejected the appeal filed by the appellant against the order dated 08.05.2016 passed by the Commissioner (Appeals), whereby Cenvat credit of Rs. 752.22 lakhs was allowed out of the total claim of Rs. 822.89 lakhs, while the balance claim of Rs. 70.67 lakhs was denied.

The appellant had imported inputs and capital goods during 1995 to 1998 against 36 advance licences issued by Customs authorities at Mumbai and Ahmedabad. Since export obligations under those licences were not fulfilled within the prescribed period, the appellant approached the Settlement Commission. By final order dated 27.11.2007, the Settlement Commission held the appellant liable to pay customs duty, including Countervailing Duty (CVD), amounting to Rs. 1698.52 lakhs relating to Mumbai Customs and Rs. 53.36 lakhs relating to Ahmedabad Customs. After making payment, the appellant sought refund or Modvat/Cenvat credit of Rs. 822.89 lakhs from the jurisdictional authorities on the basis of directions issued by the Settlement Commission.

The refund application was initially rejected, and subsequent appeals before the Commissioner (Appeals) were also dismissed. Thereafter, CESTAT remanded the matter for verification of payment of CVD and use of imported materials. In remand proceedings, the Assistant Commissioner rejected the entire claim of Rs. 822.89 lakhs. However, the Commissioner (Appeals) later allowed credit of Rs. 752.22 lakhs relating to imports made under Notification No. 30/97-Cus dated 01.04.1997 but disallowed credit of Rs. 70.67 lakhs relating to imports made under Notification No. 79/95-Cus dated 31.03.1995.

The Commissioner (Appeals) held that under Notification No. 79/95-Cus only Basic Customs Duty (BCD) was exempted and not CVD. According to the appellant, even if CVD was not required to be paid under the notification, the amount paid pursuant to the Settlement Commission order should either be refunded or allowed as Cenvat credit. The appellant argued that the department had accepted the Settlement Commission order and that payment of the entire amount including CVD was jointly worked out with Customs authorities.

The appellant further contended that the Commissioner (Appeals) had travelled beyond the original proceedings by introducing a new ground that Rs. 70.67 lakhs was not towards CVD. Reliance was placed on various judicial precedents, including decisions in Basawara Technologies Ltd. v. Commissioner of Customs, New Delhi, Nilos India Pvt Ltd v. Commissioner of Customs, Chennai, Smithkline Beecham Consumer Healthcare Ltd. v. CCE, Hyderabad, and Abhishek Fashions Pvt Ltd v. Union of India. The appellant also relied on several other judgments and a CBEC circular in support of the claim.

The departmental representative argued that the appellant’s worksheet incorrectly treated all payments as CVD without considering the relevant notification under which imports were made. It was contended that the claim lacked supporting details and therefore the denial of Cenvat credit of Rs. 70.67 lakhs was justified.

The Tribunal identified the core issue as whether the rejected amount of Rs. 70.67 lakhs actually represented CVD paid by the appellant. The Tribunal examined the Settlement Commission’s final order and noted that during the relevant period there were two governing notifications: Notification No. 79/95-Cus dated 31.03.1995 and Notification No. 30/97-Cus dated 01.04.1997. The Settlement Commission order specifically recorded that under Notification No. 79/95-Cus only Basic Customs Duty was exempt, whereas under Notification No. 30/97-Cus both Basic Customs Duty and CVD were exempt.

The Tribunal observed that the duty calculations in the Settlement Commission proceedings did not indicate that CVD liability had been computed in respect of the 23 advance licences governed by Notification No. 79/95-Cus. It noted that the Joint Director General of Foreign Trade had considered only the Basic Customs Duty component for those licences. Accordingly, the Tribunal agreed with the Commissioner (Appeals) that the amount of Rs. 70.67 lakhs was not paid towards CVD and therefore was not eligible either for Cenvat credit or refund.

Holding that imports under Notification No. 79/95-Cus were exempt only from BCD and not from CVD, the Tribunal upheld the order of the Commissioner (Appeals) and rejected the appeal.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

M/s Acculife Healthcare Pvt Ltd (Appellant), have filed the present appeal against impugned order dated 08.05.2016 passed by the learned Commissioner (Appeals) wherein against Cenvat credit of Rs. 822.89 lakhs, allowed Cenvat Credit to the tune of Rs. 752.22 Lakhs to the appellant and rejected the balance claim Rs. 70.67 Lakhs.

1.1 The facts of the case are that the appellant had imported inputs/capital goods against 27 advance licenses issued from Mumbai. Customs and 9 advance licences issued from Ahmedabad, Customs during 1995 to 1998. As they could not fulfil export obligation within the prescribed time limit, they approached Hon’ble Settlement Commission which after consulting DGFT and Customs, passed final order No. 434-435/Final Order/CUS/MGR/2007 dated 27.11.2007. In this final order, it held that the appellant is liable to pay customs duty (including CVD) of Rs. 1698.52 lakhs in respect of Mumbai, Customs and Rs. 53.36 lakhs in respect of Ahmedabad, Customs. Accordingly, the appellant paid the above amounts and approached the Jurisdictional Assistant Commissioner Division-IV, Ahmedabad-II Commissionerate for refund of Rs. 822.89 lakhs on the ground that they were directed by the Settlement Commission to approach Jurisdictional Commissioner for grant of Modavat/Cenvat credit. Their refund application was rejected vide order-in-original No. 238/09 dated 24.04.2009 against which they filed appeal before Commissioner (Appeals) which was rejected vide order dated 17.09.2009. Subsequently, they approached CESTAT which vide order No. A/10246/2015 dated 18.03.2015 remanded the matter to the lower authority for examining the claim of payment of CVD by the appellant and satisfy himself regarding use of the material. In remand proceedings, the Assistant Commissioner vide order dated 05.08.2016, rejected the application dated 23.07.2015 submitted by the appellant and disallowed Cenvat credit of Rs. 822.89 lakhs. Against this order, the appellant filed appeal before the learned Commissioner (Appeals) who vide impugned order allowed them Cenvat credit to the tune of Rs. 752.22 lakhs in respect of import of goods under Notification No. 30/97-Cus dated 01.04.1997 and disallowed Cenvat credit of Rs. 70.67 lakhs paid in respect of import of goods under Notification No. 79/95-Cus dated 31.03.1995 on the ground that under this notification only BCD was exempt and CVD portion was not forgone at the time of import of goods. Aggrieved by this order, the appellant filed present appeal before this Tribunal.

2. In their appeal, the appellant took the following grounds:-

• While rejecting their claim for Cenvat credit of Rs. 70.67 lakhs learned Commissioner (Appeals) had held that the imports had taken place under Notification No. 79/95-Cus dated 31.03.1995 under which exemption was only for BCD and not for the CVD. According to learned Commissioner, the appellant would have paid the said CVD amount at the time importation of inputs and capital goods and would have availed the Cenvat credit. Paying the said amount again as per Hon’ble Settlement Commission order dated 27.11.2007 does not entitle them of the Cenvat credit. It is a settled law by various decisions of higher Appellate authorities that in a case where duty is not required to be paid by the assessee but inadvertently paid the same is required to be refunded. In case, they were not required to pay CVD under Notification No. 79/95-Cus and the same has been paid, which is not disputed by the department, the same is required to be refunded. The appellant has therefore prayed that the impugned order be set aside to the extent of denial of Cenvat credit of Rs. 70.67 lakhs and the department may be directed to refund the same.

3. During arguments, learned Advocate pleaded that they had paid the above duty amount as per final order No. 434-435/2007 dated 27.11.2007 of Hon’ble Settlement Commission which has become final as it has not been appealed against by the department. The duty computation was jointly made with Customs authorities which was duly accepted by the Settlement Commission. The duty amount so paid by them also includes CVD amount aggregating to Rs. 822.90 lakhs. It is also a fact that out of this CVD amount, learned Commissioner (Appeals) has already allowed them Cenvat credit of Rs. 752.20 Lakhs. In the said order, he has not disputed payment of balance amount of Rs. 70.67 lakhs towards CVD. The learned Commissioner (Appeals) has also held that there is no dispute about use of imported goods by the appellant. The only ground taken by him for denying the above credit is that the imports were made under Notification No. 79/95-Cus which did not exempt CVD and therefore, CVD might have been paid at the time of import, credit of which would have been availed by the appellant. He relied on the decision of Tribunal in the case of Basawara Technologies Ltd Vs. Commissioner of Customs, New Delhi reported at 2017 (352) ELT 227 (Tri. -Del.) which held that the Commissioner (Appeals) cannot travel beyond the proceedings and cannot make out all together a new case, which was never the subject matter before the original adjudicating authority. Similar view was taken by the Tribunal in the case of Nilos India Pvt Ltd Vs. Commissioner of Customs, Chennai reported at 2009 (241) ELT 270 (Tri.-Chennai) and in the case of Smithkline Beecham Consumer Healthcare Limited Vs. CCE, Hyderabad reported at 2007 (220) ELT 133.

3.1 He further submitted that the Commissioner (Appeals) could not have made out a new case that out of total CVD of Rs. 822.90 lakhs paid by the appellant, an amount of Rs. 70.67 lakhs was not payable and therefore, Cenvat credit of such CVD paid by the appellant was not admissible. He argued that when both the findings of the Adjudicating Authority i.e. CVD claim not substantiated and use of imported goods in the manufacture of excisable goods not proved were negated by the Learned Commissioner (Appeals), the entire CVD amount was admissible to them as Cenvat Credit. Once it is admitted that entire amount of CVD was payable and subsequently paid by them, as per Hon’ble Settlement Commission’s order, denying them the benefit of Cenvat credit is not justified. He relied on the decision of Hon’ble Gujarat High Court in the case of Abhishek Fashions Pvt Ltd Vs. UOI reported at 2006 (202) ELT 762 (Guj.) where it is held that Revenue is not an organisation which is entitled to retain money without sanction of law.

3.2 He also relied on following case laws and board circular: –

• CCE & Cus. V/s. MDS Switchgear Ltd. 2008(229) ELT 485 (S.C.)
• MDS Switchgear Ltd. V/s. CCE & Cus. Aurangabad 2001(132) ELT 405 (Tri.-Mumbai)
• CCE, Bharuch V/s. Hindalco Industries Ltd. 2020(373) ELT 402 (Tri.-Ahmd.)
• CCE, Ahd-III V/s. Nahar Industries Ltd. 2014(305) ELT 9 (Guj.)
• Balakrishna Industries Ltd. V/s. CCE, Jaipur-1 2014(309) ELT 354 (Tri.-Del.)
• V/s. Balakrishna Industries Ltd. 2019(366) ELT A23 (Raj.)
• Sterlite Industries (1) Ltd. V/s. CCE, Tirunelveli2012(25) STR 66 (Tri.-Chennai)
• Circular No. 1014/2/2016- CE dated 1.2.2016

4. During arguments, learned AR sought time for obtaining comments from the Adjudicating authority which, he produced before the Bench on 17th December,2025. On the basis of this letter, learned AR mentioned that the appellant in their worksheet has shown payment of CVD in all the cases without even taking into consideration the Notification under which the said goods were imported. In absence of vital details, the Adjudicating authority found that the worksheet so submitted is incorrect and cannot be relied upon. He justified denial of Cenvat credit of Rs. 70.67 lakhs by the learned Commissioner (Appeals). Learned AR reiterated the finding of the Commissioner (Appeals) and prayed for setting aside the party’s appeal.

5. Heard both the sides. The issue to be decided in this case is whether Cenvat credit claim of Rs.70.67 lakhs rejected by the learned Commissioner (Appeals) pertains to amount of CVD paid by the appellant?

5.1 After settling their case as per the order of Settlement Commission, the appellant filed claim for allowing Cenvat credit of CVD of Rs. 822.89 lakhs paid on import of inputs and capital goods against 36 advance licenses. Vide impugned order, learned Commissioner (Appeals) allowed Cenvat credit of Rs. 752.22 lakhs only and rejected their claim for rest amount of Rs. 70.67 lakhs on the ground that in respect of 23 advance licenses, the appellant had imported goods by availing benefit of Notification No. 79/95-Cus dated 31.03.1995 where only Basic Customs Duty was exempt. He thus, concluded that the balance amount of Rs. 70.67 lakhs paid by the appellant is not towards CVD which finding has now been contested by the appellant before the Tribunal.

5.2 We find that the appellant has paid above amount in accordance with final order dated 27.11.2007 passed by the Settlement Commission, para 9 of which mentions that:-

“out of the aforesaid 36 Advance Licences, 27 were registered with the Commissioner of Customs, Mumbai, whereas 9 were registered with Commissioner of Customs, Ahmedabad. The applicant under the aforesaid 36 Advance Licences during the period 1995 to 1999 availed duty benefit to the tune of Rs.1966.20 lakhs. The applicant could not fulfil the entire export obligation and, therefore, was required to pay back the amount of duty benefit. As a result of which, the differential duty payable was Rs.1636.19 lakhs (Mumbai Customs Rs.1587.69 lakhs + Ahmedabad Customs Rs.48.50 lakhs The applicant on its own initiative out of its desire to set right the default in not fulfilling the entire export obligation had filed the settlement application admitting the additional amount of duty liability of Rs.1636.19 lakhs, The applicant thereafter, vide its applications dated 21.08.2000 and 12.03.2001 further admitted additional amount of duty liability of Rs.97.36 lakhs and Rs.10. 50 lakhs respectively. Thus, the total additional amount of duty liability admitted by the applicant in the said application was Rs. 1744.05 lakhs (Mumbai Customs Rs.1695.35 lakhs + Ahmedabad Customs Rs.48.70 lakhs). As regards the admitted additional amount of duty liability in respect of Ahmedabad Customs, after the joint meeting of the departmental officers with the applicant’s representatives, the Commissioner of Customs, Ahmedabad had worked out the duty liability of Rs. 53,36,336/- as against Rs.48.70 lakhs admitted by the applicant. The applicant accepted the liability of Rs. 53,36,336/- However, as regards the admitted additional amount of duty liability in respect of Mumbai Customs, despite best of efforts of the applicant, the exact amount of additional amount of duty was not worked out by the Mumbai Customs. Now, DGFT, Ahmedabad vide verification report dated 28.09.2007, ascertained the duty liability to Rs. 1698.52 lakhs as against the duty liability of Rs. 1695.35 lakhs admitted by the applicant. He, therefore, prayed that the Bench may settle the case by accepting the duty liability of Rs. 1695.35 lakhs [Mumbai Customs) as admitted by the applicant. As regards Ahmedabad Customs, the Bench may settle the case by accepting the duty liability of Rs. 53.36 lakhs. Thus the case may be settled by accepting the total duty liability to the tune of Rs.1748.71 lakhs.”

5.3 We further find that para 11.4 of this order notes that :-

“11.4 The Revenue further submitted that according to the JDGFT, the total liability on account of 27 Advance Licences pertaining to application No.1, is Rs.1698.52 lacs (without interest). The Department’s claim is Rs. 1949.95 lacs which was also submitted earlier. The difference in the amounts claimed [as against the claim of JDGFT] is on account of the following.

11.4.1 During the material period, there were 2 Notifications that governed the Advance Licence Scheme, viz., Notification No(s).79/95-Cus dated 31.03.1995 and 30/97-Cus dated 01.04.1997. In the former Notification, only the Basic Duty was exempt (as seen from the copies of the Bills of Entry), and in respect of the second mentioned Notification both Basic Duty and C.V. Duty were exempted.

11.4.2 The JDGFT in their calculation have taken into account only the Basic Customs duty i.e. they have considered only amounts to the extent of Duty Foregone on account of Basic Duty and have not taken into account the liability on account of Additional Duty. This has also been stated in their report furnished to the Commission. Whereas, the Department has taken both the Basic Customs Duty and also Additional Duty wherever applicable and payable. But for the Additional Duty element payable, which has also been conceded by the JDGFT, the figures are not disputed.”

5.4 The order further noted in para 12.2 that :-

“12.2 The Revenue has submitted, with reference to application No.1, that during the material period, there were 2 Notifications that governed the Advance Licence Scheme, viz., Notification No. (s)79/95-Cus dated 31.03.1995 and 30/97-Cus dated 01.04.1997. In the former Notification, only the Basic Duty was exempt and in respect of the second mentioned Notification both Basic Duty and C. V. Duty were exempted. The JDGFT in their calculation have taken into account only the Basic Customs Duty i.e. they have considered only amounts to the extent of Duty Foregone on account of Basic Duty and have not taken into account the liability on account of Additional Duty. This has also been stated in their report furnished to the Commission. However, the DGFT, vide their report dated 18.10.2007, have clarified that as regards the verification of the total amount of duty liability they have made efforts to verify the total amount of duty involved in respect of the advance licences and DEFBs in question based on the information/documents submitted by the firm/customs. However, they could not ascertain the segregation of other duties such as SAD etc. in the total amount included in the verification report. In view of this, the Settlement Commission may take a view on the issue of segregation of SAD etc. in the total amount of duty liability in respect of the advance licences/DEPBs in question.”

5.5 Thereafter in para 16, the Settlement Commission has settled the case as under:-

“16. Keeping in view all the facts and circumstances of the case, we lay down the following terms under sub-section (7) of Section 127C of the Act for settlement of this case:-

Customs Duty: The Customs duty in this case is settled as follows:

5.6 From the above, we are of the view that the amount of Rs. 70.67 lakhs, which appellant had requested for either allowing as Cenvat credit or by way of refund, was not paid towards CVD and therefore, its credit is not admissible to them. We agree with the finding of the learned Commissioner (Appeals) that the goods imported by availing benefit of Notification No. 79/95-Cus, were only exempt from BCD and not of CVD. In the entire duty calculation as per the order of Settlement Commission, it is nowhere reflected that CVD portion was also calculated as duty liability in respect of 23 advance licenses issued under Notification No. 79/95-Cus. We therefore uphold the order of learned Commissioner (Appeals) and reject the appeal.

6. The appeal rejected.

(Pronounced in the open court on 05.05.2026)