2026 (1) TMI 508 - AT - Central Excise

CENVAT credit on 1%/2% CVD for imported steam coal u/r 3 denied, then allowed as no credit bar

CENVAT credit on 1%/2% Additional Duty of Customs (CVD) paid on imported steam coal under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 was denied by ... Availment of CENVAT credit of Additional Duty of Customs (Countervailing Duty – CVD) paid at the concessional rates of 1% and 2% on imported steam coal, under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 - period April 2012 to May 2015, and June 2015 to January 2016 - invocation of extended period of limitation - levy of penalty under Rule 15(2) read with Section 11AC. HELD THAT:- The proviso to Rule 3(1)(i) applies exclusively to duty of excise. Customs Notification No. 12/2012-Cus is issued under Section 25 of the Customs Act, 1962 and does not impose any restriction on credit. It is settled law that conditions cannot be read into a notification when none exist. The Hon’ble Supreme Court has held in the case of Hansraj Gordhandas v. H.H. Dave, [1968 (9) TMI 112 - SUPREME COURT] that exemption notifications must be interpreted strictly and no additional conditions can be implied. Therefore, the denial of credit by importing excise side restrictions into customs notifications is legally unsustainable. The consistent view taken by this Tribunal as well as affirmed by the Hon’ble Calcutta High Court is that CENVAT credit of 1% / 2% Additional Duty of Customs (CVD) paid on imported coal is admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004, and that conditions prescribed under Central Excise exemption notifications cannot be imported into or superimposed upon Customs notifications for the purpose of denial of such credit. In Shyam Steel Industries Ltd. [2022 (9) TMI 230 - CALCUTTA HIGH COURT], the Hon’ble High Court has unequivocally held that CVD levied under Section 3 of the Customs Tariff Act retains its character as a customs duty and that restrictions contained in Central Excise notifications have no application to duties levied under the Customs law. The said judgment, being of a High Court, is binding and squarely applicable to the facts of the present case. The Appellant is entitled to avail CENVAT credit of 1% / 2% Additional Duty of Customs (CVD) paid on imported coal under Notification No. 12/2012-Cus dated 17.03.2012 and Notification No. 12/2013-Cus dated 01.03.2013 - Appeal allowed. Issues: (i) Whether CENVAT credit of 1% / 2% CVD paid on imported steam coal is admissible under Rule 3(1)(vii) of CCR, 2004? (ii) Whether conditions in Central Excise exemption notifications can be imported into Customs notifications? (iii) Whether the extended period under Section 11A(4) is invocable? (iv) Whether penalty under Rule 15(2) read with Section 11AC is sustainable?Issue (i): Whether CENVAT credit of 1% / 2% CVD paid on imported steam coal is admissible under Rule 3(1)(vii) of CCR, 2004?Analysis: Rule 3(1)(vii) expressly permits credit of the additional duty leviable under Section 3 of the Customs Tariff Act. Section 3(1) creates a legal fiction by measuring the additional duty with reference to excise duty while retaining the levy's character as a customs duty. The text of the Rule contains no qualification limiting admissibility to CVD paid at tariff rates or excluding concessional rates. Notifications under the Customs Act (including Notification No. 12/2012-Cus and Notification No. 12/2013-Cus) prescribe concessional rates of additional duty but do not impose any condition barring availment of CENVAT credit. The Tribunal's consistent precedents and the relevant High Court authority support the conclusion that such CVD payments qualify for credit under the Rule.Conclusion: CENVAT credit of 1% / 2% CVD paid on imported steam coal is admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004.Issue (ii): Whether conditions in Central Excise exemption notifications can be imported into Customs notifications?Analysis: The proviso to Rule 3(1)(i) applies to duties of excise paid under specified Central Excise notifications and does not extend to duties paid under the Customs Tariff Act. Customs notifications are issued under the Customs Act and, where they do not expressly contain restrictions on credit, conditions from Central Excise exemption notifications cannot be grafted onto them by implication. The principle of strict interpretation of exemption notifications further precludes reading additional conditions into a notification issued under a different taxing statute.Conclusion: Conditions in Central Excise exemption notifications cannot be imported into Customs notifications for the purpose of denying CENVAT credit.Issue (iii): Whether the extended period under Section 11A(4) is invocable?Analysis: The judgment decides the core substantive issue in favour of the assessee and expressly refrains from adjudicating the remaining issues, including the applicability of the extended period under Section 11A(4), as unnecessary in light of the primary finding.Conclusion: Not examined.Issue (iv): Whether penalty under Rule 15(2) read with Section 11AC is sustainable?Analysis: The Tribunal did not examine the merits of the penalty question because the principal question on admissibility of credit was decided in favour of the assessee; consequently the need to determine sustainability of penalty did not arise.Conclusion: Not examined.Final Conclusion: The decision establishes that, where a customs notification prescribing a concessional additional duty does not itself restrict availment of credit, the corresponding CVD retains its character as a customs duty eligible for CENVAT credit under Rule 3(1)(vii), and subsidiary questions dependent on a contrary finding need not be adjudicated.Ratio Decidendi: Where Rule 3(1)(vii) of the CENVAT Credit Rules permits credit of the additional duty leviable under Section 3 of the Customs Tariff Act and a customs notification prescribing concessional CVD contains no express bar to credit, conditions from Central Excise exemption notifications cannot be read into the customs notification to deny CENVAT credit.