2010 (4) TMI 281 - HC - Central Excise

High Court upholds assessee's Cenvat credit claim, dismissing revenue's appeal.

The High Court dismissed the revenue's appeal, upholding the decisions of the Adjudicating Authority, Commissioner (Appeals), and the Appellate Tribunal. ... Cenvat Credit –CVD paid through DEPB - During the course of audit of the records, it was noticed by the officers of the department that the assessee had imported certain raw material under the Duty Entitlement Pass Book (for brevity “the DEPB”), on which additional duty of customs i.e. CVD had been debited from DEPB account and had not been paid in cash. – Held that: - the EXIM Policy amended, vide Notification dated 28.1.2004 and Notification No.96 dated 17.9.2004, postulate that “an importer shall be entitled to avail the Cenvat credit of additional duty leviable under section 3 of the Act against the amount debited in DEPB. There is no such condition in the indicated notifications that the debits made in DEPB, the licenses issued under the Foreign Trade Policy only would be eligible for credit and the debits made in DEPB issued under the previous policy will not be eligible for credit. It means, the assessee was entitled to claim the benefit in this relevant connection. - Once the Notification has been amended on 17.9.2004 to extend the benefit of availment of credit of CVD debited through DEPB account, in that eventuality, the revenue cannot deny the benefit of Cenvat credit to the assessee, in the obtaining circumstances of the case. – decided in favor of assessee Issues:Appeal against dismissal of appeal by Customs, Excise & Service Tax Appellate Tribunal regarding Cenvat credit on imported raw material under DEPB account.Analysis:The case involved an appeal by the revenue against the dismissal of its appeal by the Customs, Excise & Service Tax Appellate Tribunal. The respondent-assessee, a manufacturer of T.R. Belting and Conveyor Belting, availed Cenvat credit of duty on inputs under the Cenvat Credit Rules, 2002. The revenue alleged that the assessee wrongly availed the credit as certain raw materials were imported under the DEPB account, with additional customs duty (CVD) debited from the account but not paid in cash. A show cause notice was issued to the assessee, which claimed that the credit was admissible under the EXIM Policy and relevant notifications. The Adjudicating Authority disallowed the credit, leading to an appeal by the assessee.The Assistant Commissioner later dropped the proceedings and sanctioned a refund of the Cenvat credit to the assessee. The Commissioner (Appeals) accepted the assessee's appeal and set aside the demand and penalty. The revenue's appeal against the Assistant Commissioner's order was rejected. Subsequent appeals by the revenue were also dismissed by the Appellate Tribunal, leading to the present appeal.The main argument raised by the revenue was that the Cenvat credit was not admissible as the license was issued under the previous policy. However, the High Court held that the relevant notifications postulated that an importer could avail the credit against the amount debited in the DEPB, without any condition regarding the policy under which the license was issued. The Court found that the assessee fulfilled all other conditions for availing the credit and that the Adjudicating Authority rightly dropped the proceedings and refunded the amount. No other legal infirmity in the impugned order was identified.In conclusion, the High Court dismissed the present appeal by the revenue, upholding the orders of the Adjudicating Authority, Commissioner (Appeals), and the Appellate Tribunal. The Court found that the assessee was entitled to claim the Cenvat credit under the relevant notifications, and the revenue's arguments were devoid of merit.