Cenvat credit on DFIA imports upheld after retrospective validation of the customs notification and notice-bound adjudication.

Cenvat credit on SAD paid on DFIA imports was held admissible because the retrospective amendment to Notification No. 40/2006-Customs, validated by Section 92 of the Finance Act, 2009, covered the relevant period from 1 May 2006 to 18 February 2009. Denial of credit also failed because the authorities relied on condition (iiia) even though the show cause notice proceeded only on condition (v); a demand cannot be sustained on a ground not set out in the notice. The assessee was therefore entitled to the credit.

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Issues: Whether Cenvat credit on SAD paid on imports made under the DFIA scheme was admissible in view of the retrospective amendment to Notification No. 40/2006-Customs and whether the authorities could sustain denial on a ground not forming part of the show cause notice.

Analysis: The show cause notice proceeded on the basis of condition (v) of Notification No. 40/2006-Customs, but the adjudicating and appellate authorities denied credit by relying on condition (iiia). Such a shift in the basis of demand was not permissible because adjudication cannot travel beyond the scope of the notice. On the substantive issue, Section 92 of the Finance Act, 2009 retrospectively amended and validated Notification No. 40/2006-Customs for the relevant period, substituting the condition in clause (v) with effect from 1 May 2006 to 18 February 2009.

Conclusion: The denial of credit could not be sustained, and the assessee was entitled to Cenvat credit on the import made under DFIA.

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