Cenvat credit bar on DEPB-adjusted customs duty upheld where the import-export policy expressly prohibited the benefit.

Cenvat credit was held inadmissible on additional customs duty adjusted through DEPB when the governing import-export policy and exemption framework expressly prohibited such credit. The court read the policy, exemption notification, circular, and Cenvat Credit Rules together and found that, from 1.4.2000 onward, the policy contained a specific bar against Cenvat benefit where the duty was discharged by DEPB debit. It also noted that the import document for 2003 did not show cash payment of duty, and that the earlier contrary ruling applied only to the period before the restrictive wording was introduced.

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Issues: Whether Cenvat credit could be denied merely because the additional customs duty was discharged through DEPB debit under the prevailing Exim Policy and exemption notifications, in the absence of a specific restriction in the Cenvat Credit Rules, 2002.

Analysis: The clearance of imported inputs under the DEPB-based exemption scheme was treated as a duty-neutral mechanism tied to exports, and the court read the scheme, the exemption notification, the circular, and the Cenvat Credit Rules together. It held that the relevant legal position changed from 1.4.2000 onwards, because the policy then contained an express prohibition that where additional customs duty was adjusted from DEPB, no Cenvat benefit would be admissible. The court further noted that the import document for the year 2003 did not show cash payment of duty and that the earlier decision relied on by the assessee applied only to the period before the restrictive wording was introduced.

Conclusion: Cenvat credit was not admissible on the facts, and the question of law was answered against the assessee.

Ratio Decidendi: Where the governing import/export policy expressly bars Cenvat benefit for additional customs duty adjusted through DEPB, credit cannot be claimed on such duty.

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