CESTAT sets Aside Demand for CENVAT Credit on Concessional CVD Paid on Imported Coal; Allows India Cements Appeal [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai RegionalBench, set aside the demand and penalty against M/s India Cements Ltd., holding that CENVAT credit is admissible on Countervailing Duty (CVD) paid at concessional rates on imported steam coal.

The Tribunal ruled in favour of the assessee, allowing the credit of CVD paid at 1% and 2% under Notification No. 12/2012-Cus, and held that the extended period of limitation was not invokable as the issue was interpretational.

M/s India Cements Ltd., the Appellant, is engaged in the manufacture of clinker and cement and had availed CENVAT credit on CVD paid on imported steam coal during the period from September 2012 to June 2017. The Department denied the credit because the CVD paid at concessional rates was not “equivalent to duty of excise” and thus ineligible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004. Consequently, the Commissioner confirmed a demand of Rs. 3.63 Crores along with interest and a penalty of Rs. 2.42 Crores.

The Appellant contended that the credit eligibility depends on the nature of the levy (CVD under Section 3 of the Customs Tariff Act) and not the rate or quantum of duty paid. It was argued that the issue was settled in favour of the assessee by various judicial precedents and that all facts were disclosed in the returns, precluding the invocation of the extended period of limitation.

The Bench of Mr. Vasa Seshagiri Rao (Member Technical) and Mr. Ajayan T.V. (Member Judicial) observed that the term “equivalent to duty of excise” refers to the measure of the levy and not its intrinsic nature or the rate. The Tribunal relied on a catena of decisions, including Seshasayee Paper and Boards Ltd. and Shyam Steel Industries Ltd., to hold that credit cannot be denied merely because the duty was paid at a concessional rate.

The Tribunal observed:

“Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 permits availment of credit of ‘the additional duty leviable under Section 3 of the Customs Tariff Act’. The Rule does not impose any condition that such duty must be paid at the tariff rate or that it must strictly correspond to the rate of excise duty... Denial of credit on the basis of concessional rate of duty would defeat the very purpose of the scheme.”

Regarding the limitation, the Tribunal held that the issue related to the interpretation of law and that there was no suppression of facts or intent to evade duty on the part of the Appellant. Relying on Pushpam Pharmaceuticals Co., the Tribunal ruled that the extended period under Section 11A could not be invoked for a mere difference of opinion on the interpretation of statutory provisions.

In view of this, CESTAT allowed the appeal, setting aside the Order-in-Original and permitting the Appellant to retain the CENVAT credit availed on the concessional CVD.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates