2021 (9) TMI 191 - AT - Central Excise

Tribunal allows appeal, grants CENVAT credit on imported coal, penalties overturned

The Tribunal allowed the appeals, setting aside the Commissioner's decision to disallow CENVAT credit of 1%/2% Additional Duty of Customs paid on imported ... CENVAT Credit - 1%/2% Additional Duty of Customs (CVD) paid on the imported coal - Customs Notification No. 12/2012-Cus dated March 17, 2012, as amended on by Notification dated March 1, 2016 - CVD paid @2% is duty of excise as specified in the Excise Tariff Act or not - HELD THAT:- A Division Bench of the Tribunal in M/S HINDALCO INDUSTRIES LTD. APPELLANT VERSUS GST, BHOPAL RESPONDENT [2018 (3) TMI 1124 - CESTAT, NEW DELHI], considered this precise issue and held that if additional duty of customs has been paid after taking into consideration the Customs Notification dated March 17, 2012, there would be no bar for availment of CENVAT credit in terms of rule 3(vii) of the Credit Rules. The provisions of rule 3 of the Credit Rules and the three decisions rendered by the Tribunal in Hindalco Industries Ltd., JAYPEE SIDHI CEMENT PLANT VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, CUSTOMS AND EXCISE, JABALPUR [2019 (7) TMI 250 - CESTAT NEW DELHI] and M/S. ASAHI SONGWON COLORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST., VADODARA [2018 (9) TMI 159 - CESTAT AHMEDABAD] were examined by the Tribunal and after distinguishing the decision of the Gujarat High Court in LONSENKIRI CHEMICALS INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS AND SERVICE TAX, VADODARA-I [2018 (9) TMI 1439 - GUJARAT HIGH COURT], which decision had also subsequently been distinguished by the Tribunal in C.C.E. & S.T.- Surat-I vs. M/s. Aarti Industries Limited [2019 (3) TMI 240 - CESTAT AHMEDABAD], the Tribunal concluded that if additional duty of Customs was paid after taking into consideration the Customs Notification dated March 17, 2012, there would be no bar for availment of CENVAT credit in terms of rule 3 (vii) of the Credit Rules. In view of the decision of the Tribunal in the appellant’s own case [2020 (10) TMI 1032 - CESTAT NEW DELHI], it has to be held that the Commissioner committed an illegality in disallowing CENVAT Credit of 1%/2% CVD paid on the imported coal under the Customs Notification No. 12/2012-Cus dated March 17, 2012, as amended on by Notification dated March 1, 2016. The Commissioner has also taken into consideration the fact that for the Financial Year 2012-13, the appellant had paid duty under the Excise Notification because of which credit was not admissible - The appellant has stated that though the appellant had taken CENVAT credit of CVD paid in terms of the Excise Notification, but the appellant subsequently suo moto partially reversed CENVAT credit and with respect to the balance CENVAT credit of 1% CVD paid, the appellant paid additional CVD at the rate of 5% under protest but availed CENVAT credit of only 1% of CVD paid. Though this fact was pointed out by the appellant, but the Commissioner failed to consider this aspect. The order dated February 26, 2019 passed by the Commissioner adjudicating the five show cause notices deserves to be set aside - Appeal allowed. Issues Involved:1. Admissibility of CENVAT credit of 1%/2% Additional Duty of Customs (CVD) paid on imported coal under Customs Notification No. 12/2012-Cus.2. Reversal of CENVAT credit due to short receipt and sub-standard quality of coal.3. Invocation of the extended period of limitation.4. Imposition of penalty and recovery of interest.Detailed Analysis:1. Admissibility of CENVAT Credit of 1%/2% Additional Duty of Customs (CVD) Paid on Imported Coal:The core issue in these appeals is whether the appellant, engaged in manufacturing zinc and lead concentrates, can avail CENVAT credit of 1%/2% CVD paid on imported coal under Customs Notification No. 12/2012-Cus. The appellant paid CVD in terms of section 3(1) of the Customs Tariff Act on the importation of steam coal and availed CENVAT credit as per rule 3(1)(vii) of the CENVAT Credit Rules, 2004. However, the Commissioner denied this credit, arguing that CVD paid under the Customs Notification is not equivalent to the duty of excise specified in the Excise Tariff Act, thereby making the credit inadmissible.The Tribunal found that the Commissioner erroneously mixed up rule 3(1)(i) and rule 3(1)(vii) of the Credit Rules. The Tribunal emphasized that Hindustan Zinc had paid additional duty of customs under the Customs Notification, not the Excise Notification, and thus, the conditions specified in rule 3(1)(i) should not have been applied to rule 3(1)(vii). The Tribunal cited previous decisions, including Hindalco Industries Ltd. vs. GST, Bhopal, and Jaypee Sidhi Cement Plant vs. Commr. of CGST, which supported the appellant's stance that CENVAT credit of CVD paid on imported coal under the Customs Notification is permissible.2. Reversal of CENVAT Credit Due to Short Receipt and Sub-Standard Quality of Coal:The Commissioner also considered the appellant's First Information Report (FIR) indicating a short receipt and sub-standard quality of imported coal, leading to a demand for reversal of CENVAT credit amounting to Rs. 19,39,554/-. The appellant argued that no factual enquiry was conducted to quantify the short receipt, and the figure in the FIR was used without verification. The Tribunal noted the appellant's commitment to reverse the CENVAT credit if the investigation confirmed the sub-standard quality of coal, indicating that the Commissioner's decision on this ground lacked a proper factual basis.3. Invocation of the Extended Period of Limitation:The Commissioner invoked the extended period of limitation, alleging that the appellant consciously took inadmissible CENVAT credit. However, the Tribunal found that the denial of credit was based on a misinterpretation of the applicable rules and notifications. Previous Tribunal decisions, such as Hindalco Industries Ltd. and Jaypee Sidhi Cement Plant, had clarified the correct application of the rules, suggesting that the appellant's actions were not willful misstatements or suppressions of facts. Therefore, the extended period of limitation was deemed inapplicable.4. Imposition of Penalty and Recovery of Interest:Given the Tribunal's findings that the appellant correctly availed CENVAT credit under rule 3(1)(vii) of the Credit Rules and that the Commissioner's order was based on a misreading of the rules, the imposition of penalties and recovery of interest were also found to be unjustified. The Tribunal referred to its earlier decision in the appellant's own case, which had set aside similar demands and penalties.Conclusion:The Tribunal concluded that the Commissioner committed an illegality in disallowing CENVAT credit of 1%/2% CVD paid on imported coal under the Customs Notification No. 12/2012-Cus. The Tribunal set aside the order dated February 26, 2019, adjudicating the five show cause notices, and allowed the appeals. The decision was pronounced on September 2, 2021.