2008 (11) TMI 220 - AT - Central Excise

Tribunal Upheld Recovery of Inadmissible Cenvat Credit Based on Statutory Provisions

The impugned demand for recovery of inadmissible Cenvat credit was upheld based on statutory provisions and the Tribunal's decision. The amendments to the ... Cenvat Credit – duty paid utilizing DEPB – allow ability – held that - , it is obvious that additional duty of customs paid by adjustment in DEPB scrip at the material time was not available as Cenvat credit owing to express statutory prohibition against such availment. The same became admissible even if paid by adjustment in DEPB scrip when the Exim Policy and the exemption notification were appropriately amended - The credit of the additional customs duty paid by adjustment in DEPB scrip commenced to be allowed only after the Exim Policy and the DEPB Notification were appropriately altered. Therefore, the impugned order passed following the ratio of the Larger Bench decision of the Tribunal in Essar Steels Ltd. case is in accordance with law and the same does not call for any interference Issues:- Admissibility of Cenvat credit availed by the appellant against adjustment of additional duty of customs by debit under DEPB Scheme.- Interpretation of Notification No. 34/97-Cus dated 7-4-97 and relevant statutory provisions.- Applicability of Circular No. 5/05-Cus dated 31-1-05 regarding payment of education cess.- Whether the impugned demand for recovery of inadmissible Cenvat credit deserved to be set aside or upheld.Analysis:Issue 1: Admissibility of Cenvat credit availed by the appellant against adjustment of additional duty of customs by debit under DEPB Scheme:The appellant availed Cenvat credit against adjustment of additional duty of customs by debit under the DEPB Scheme. The Commissioner (A) upheld the demand for recovery of the credit, citing the decision of the Larger Bench of the Tribunal in Essar Steels Ltd. case. The appellant argued that the prohibition on availing credit by adjustment in DEPB scrip was in accordance with Notification No. 34/97-Cus and the Cenvat credit scheme remained unchanged. However, it was clarified that the credit of additional duty of customs paid by adjustment in DEPB scrip was allowed only after relevant amendments to the Exim Policy and DEPB Notification. The impugned order was upheld as per the Tribunal's decision.Issue 2: Interpretation of Notification No. 34/97-Cus dated 7-4-97 and relevant statutory provisions:Notification No. 34/97-Cus aimed at promoting exports by exempting duties of customs on imported goods under the DEPB Scheme. The Exim Policy and DEPB Notification outlined the conditions for availing Cenvat credit, specifying that credit would not be available for additional duty of customs discharged using DEPB scrip. The statutory provisions allowed importers to choose between discharging duty using DEPB scrip or cash for Cenvat credit eligibility.Issue 3: Applicability of Circular No. 5/05-Cus dated 31-1-05 regarding payment of education cess:Circular No. 5/05-Cus clarified that education cess could be paid by debiting the DEPB scrip, even for imports under exemption notifications. However, it was argued that the payment of education cess by adjustment in DEPB book did not constitute payment of duty, as the basic duty was exempted by debiting equivalent credit.Issue 4: Impugned demand for recovery of inadmissible Cenvat credit:The impugned demand for recovery of inadmissible Cenvat credit was upheld based on the statutory provisions and the Tribunal's decision in Essar Steels Ltd. case. The amendments to the Exim Policy and DEPB Notification allowed for the credit of additional duty of customs paid by adjustment in DEPB scrip, which was not permissible earlier. Therefore, the impugned order was deemed consistent with the law, and the appeal was dismissed.This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant notifications, and the reasoning behind upholding the impugned demand for recovery of inadmissible Cenvat credit.