In the case of Chettinad Cements, the Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that CENVAT Credit of 2% CVD paid on imported steam coal can be avail under customs notification.
M/s. Chettinad Cement Corporation Private Ltd, the appellant is engaged in the manufacture of clinker and cement and has registered with the Central Excise department. The appellant imported steam coal and used the same in the generation of steam/electricity which in turn was used in relation to the manufacture of their final products.
From 1/3/2011, steam coal attracts central excise duty at the rate of 5% advalorem vide Notification no.2/2011 CE dated 1/3/2011. However, a 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 viewed that the appellant is not eligible to avail of the said credit in view of the embargo under Notification 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.
Shri. Parthasarathy appeared and argued for the appellant. It was 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 the final product namely, cement. With effect from 1/3/2011, the steam coal was subjected to Central Excise duty at 5% adv. vide Notification 2/2011 – CE dated 1/3/2011. The appellant paid 2% CVD on imported coal under Notification 12/2012 – Cus. dated 17/3/2012 as amended by Notification 12/2013 Cus. dated 1/3/2013, and availed credit of the same.
A two-member bench of Ms Sulekha Beevi C S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) observed that “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 dt. 17.3.2012 is availed. The CCR 2004 does not impose any bar or restriction in availing credit when the benefit of exemption is availed under Notification No.12/2012-Cus. dt. 17.3.2012.”
Further relying on judicial precedents, the Tribunal viewed that Customs notification applies to the imported coal whereas the Excise Notification applies to the domestically manufactured goods. 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.
The CESTAT set aside the demand and allowed the appeal.
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