Settlement Commission immunity and payment certificate support CENVAT credit, while penalty on settled matters remains impermissible.

A Settlement Commission order directing issuance of a certificate of payment for countervailing duty was treated as sufficient to support CENVAT credit, because the certificate was issued pursuant to that order and the later CENVAT regime had already come into force; the earlier certification rule was therefore inapplicable. The same settlement also granted full immunity from penalty and fine for the matters covered, so no penalty proceedings could be initiated on the settled contraventions. The Tribunal's order was sustained and the departmental challenge failed, with the questions of law answered against the department and in favour of the assessee.

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Issues: (i) whether the assessee was entitled to avail CENVAT credit on the strength of the certificate issued pursuant to the Settlement Commission's order; (ii) whether penalty could be imposed notwithstanding the immunity granted by the Settlement Commission.

Issue (i): whether the assessee was entitled to avail CENVAT credit on the strength of the certificate issued pursuant to the Settlement Commission's order.

Analysis: The Settlement Commission had expressly directed that, in respect of the countervailing duty paid, the DRI or the jurisdictional authority would issue a certificate of payment so that the assessee could claim MODVAT benefit in accordance with law. The certificate was issued in pursuance of that order, and the relevant CENVAT regime had already come into force. The rule relied upon by the department governing certification under the earlier regime was therefore held inapplicable.

Conclusion: The credit was held to be admissible and the objection to the certificate was rejected.

Issue (ii): whether penalty could be imposed notwithstanding the immunity granted by the Settlement Commission.

Analysis: The Settlement Commission had granted full immunity from penalty and fine in respect of the matters covered by the settlement. The alleged contraventions were part of the very dispute settled by that order, and after settlement it was not open to the department to initiate proceedings for penalty on the same matters.

Conclusion: Imposition of penalty was held impermissible and the department's challenge failed.

Final Conclusion: The order of the Tribunal was sustained, and the departmental appeal was dismissed with the questions of law answered against the department and in favour of the assessee.

Ratio Decidendi: Where the Settlement Commission expressly grants immunity and directs issuance of proof of payment for enabling credit in accordance with law, the department cannot ignore that settlement and invoke an inapplicable earlier procedural rule to deny the credit or impose penalty on the same settled matter.

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