Cenvat credit on DEPB-debited customs duty was barred under the prevailing exemption scheme until the policy was amended.

Additional duty of customs discharged by debit in a DEPB scrip was not eligible for Cenvat credit under the notification and Exim Policy then in force, because credit was expressly confined to duty paid in cash and DEPB debit operated as an exemption mechanism. Later amendments expanding the benefit applied only prospectively after the scheme was changed. The clarification on education cess did not alter the position on admissibility of credit on the additional duty itself, so the demand was correctly upheld against the assessee.

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Issues: Whether additional duty of customs discharged by debit in the DEPB scrip, at the material time, was eligible for Cenvat credit.

Analysis: The relevant DEPB notification and the Exim Policy, as they stood at the material time, expressly restricted Cenvat credit in respect of additional duty of customs discharged through DEPB debit and allowed such credit only where the duty was paid in cash. The scheme treated debit in the DEPB book as an exemption mechanism for customs duties, and later changes expanding the benefit to cover such credit operated only after the policy and notification were amended. The clarification regarding education cess did not alter the legal position governing admissibility of credit on the additional duty of customs itself.

Conclusion: The credit was not admissible at the material time and the demand was correctly upheld, against the assessee.

Final Conclusion: The appeal failed because the statutory scheme, as applicable when the imports were made, barred Cenvat credit on additional duty of customs discharged by DEPB debit.

Ratio Decidendi: Where the applicable exemption notification and export policy expressly bar Cenvat credit on additional duty of customs discharged by DEPB adjustment, such credit cannot be claimed until the scheme is validly amended to permit it.

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