Cenvat credit on duty actually paid was sustained, and extended limitation was unavailable absent suppression.

Cenvat credit was stated to be admissible on Special Additional Duty actually paid on imported goods where the customs assessment accepting that duty was never challenged and the exemption position under Notification No. 20/2006-Cus. was not free from doubt. The note also states that denial of credit would be unsustainable because the duty had been paid and reflected in statutory records, while the Revenue could not retain the duty and simultaneously refuse credit. It further records that the extended limitation period could not be invoked because the availment of credit was disclosed in returns and there was no suppression or misstatement with intent to evade duty.

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Issues: (i) Whether Cenvat credit was admissible on Special Additional Duty paid at the time of import, when the goods were claimed to be exempt under Notification No. 20/2006-Cus. dated 1-3-2006; (ii) whether the demand to deny such credit was barred by limitation in the absence of suppression or misstatement.

Issue (i): Whether Cenvat credit was admissible on Special Additional Duty paid at the time of import, when the goods were claimed to be exempt under Notification No. 20/2006-Cus. dated 1-3-2006.

Analysis: The imported goods had in fact suffered Special Additional Duty and the customs assessment accepting such payment was never challenged. The notification entry relied upon by the Revenue described the goods as "raw wool", while the assessee had imported scoured wool, and the applicability of the exemption was not so clear as to make the payment of duty unauthorised. Credit was reflected in the regular statutory records and returns, and the Cenvat scheme allows credit of duty actually paid. Denial of credit in such circumstances would result in the Revenue retaining the duty as well as denying credit for the same amount.

Conclusion: Cenvat credit on the Special Additional Duty paid by the importer was admissible and the denial of credit was unsustainable.

Issue (ii): Whether the demand to deny such credit was barred by limitation in the absence of suppression or misstatement.

Analysis: The availment of credit was disclosed in the assessee's ordinary statutory records and returns. There was no material to attribute suppression or misstatement with intent to evade duty, particularly when the customs authorities had accepted the duty payment at the time of import and the exemption entry itself was not free from doubt. In the absence of such ingredients, the extended limitation could not be invoked.

Conclusion: The demand was barred by limitation.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief to the assessee.

Ratio Decidendi: Credit cannot be denied on duty actually paid and accepted in assessment merely because the Revenue later claims exemption, and in the absence of suppression or misstatement the extended limitation period is unavailable.

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