CENVAT Credit availed on the CVD and SAD cannot be  disallowed without evidence showing Mis Declaration: CESTAT rules in Favour of JSW Steel [Read Order]

In a ruling in favour of JSW Steel, the Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal has held that the CENVAT Credit availed on the Duty of Customs (CVD) and  Duty of Customs in lieu of Sales Tax (SAD) SAD cannot be disallowed without evidence showing Mis Declaration.

M/s. JSW Steel Limited, The appellant is engaged in the manufacture of finished Billets, Flats and Wire Rods and is registered with the Central Excise Department.  They availed CENVAT Credit on various capital goods, inputs and services under the provision of the erstwhile CENVAT Credit Rules, 2004.

 It was noticed that the appellant had imported Burnt Lime Lumps (Quick lime) by classifying the same under CTH No. 25221000 and paid duties of Customs viz., Basic Customs Duty (BCD) @ 5%, Addl. Duty of Customs (CVD) @ Nil rate and Addl. Duty of Customs ins lieu of Sales Tax (SAD) @ 4%.  The audit had observed that during the investigation initiated by the DRI, it was noticed that the said product should be classifiable under CTH No. 28259090 which attracted BCD @ 7.5%, CVD @ 12.5% and SAD @ 4% and therefore an offence case was booked by DRI for misclassification of Burnt Lime Lumbs imported by the appellant. 

A Show Cause Notice was issued proposing to demand the differential duty of Customs from the appellant was also issued.  After the receipt of the said Show Cause Notice, the appellant voluntarily paid the duty ‘under protest’ and also availed the CVD & SAD paid by them as input credit based on TR 6 Challans on 30.06.2017. 

According to the Department, as per Rule 9(1)(b) of the CENVAT Credit Rules, 2004, supplementary invoices, shall include challan or any other similar document evidencing payment of the additional amount of duty leviable under Section 3 of the Customs Tariff Act which is a prescribed document to avail CENVAT Credit except, where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short levy because of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act or Customs Act or the Rules made thereunder with intent to evade payment of duty.  

The DRI had booked an offence case alleging misclassification of goods imported by the appellant to evade payment of duty and therefore the CENVAT Credit availed in respect of CVD and SAD was not eligible in terms of provisions of Rule 9(1)(b) of the CENVAT Credit Rules, 2004.

 Show Cause Notice dated 20.05.2019 was issued to the appellant alleging wrongful availment of credit and proposing to recover the same along with interest and for imposing penalties.  After due process of law, the original authority confirmed the demand, and interest and imposed penalties.   On appeal, the Commissioner upheld the same. 

Shri M.S. Nagaraja appeared and argued for the appellant.   It was submitted that the allegation in the Show Cause Notice is that the credit availed is ineligible as per Rule 9(1)(b) of the CENVAT Credit Rules, 2004 for the reason that a Show Cause Notice has been issued to the appellant by DRI alleging misclassification of imported inputs. 

It was further submitted that since there is no allegation in the Show Cause Notice as well as no findings in the order passed by the adjudicating authority about fraud, collusion, or suppression of facts, the denial of credit is without any legal basis. 

 Authorized Representative Shri M. Ambe appeared for the Department and supported the findings in the impugned order.   It is submitted that the offence has been reported by the DRI and the Show Cause Notice has been issued alleging mis-classification of imported inputs. 

 A Coram comprising of Ms Sulekha Beevi C S, Member (Judicial) And  Mr Vasa Seshagiri Rao, Member (Technical)  observed that the duty paid on the TR-6 Challans and there is no reason to apply Rule 9(1)(b) of the CENVAT Credit Rules, 2004. After appreciating the evidence placed the CESTAT held that the demand cannot sustain and set aside the order while allowing the appeal.

To Read the full text of the Order CLICK HERE

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