CENVAT credit on concessional CVD was admissible; demand, extended limitation, interest and penalty also failed.

CENVAT credit of additional duty of customs paid at a concessional rate under Notification No. 12/2012-Cus was held admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004, because the levy under Section 3 of the Customs Tariff Act retains its character and conditions from excise exemption notifications cannot be read into the customs regime without express authority. On that basis, denial of credit was unsustainable. The demand also failed, since the credit was disclosed in statutory returns and there was no evidence of suppression, wilful misstatement, fraud or intent to evade duty. Extended limitation, interest and penalty under Section 11AC of the Central Excise Act, 1944 were therefore not sustainable, and the assessee received consequential relief.

---

---

Issues: (i) Whether CENVAT credit of additional duty of customs (CVD) paid at concessional rate under Notification No. 12/2012-Cus is admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004; (ii) Whether the demand, invocation of extended period, interest and penalty are sustainable.

Issue (i): Whether CENVAT credit of additional duty of customs (CVD) paid at concessional rate under Notification No. 12/2012-Cus is admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004.

Analysis: Rule 3(1)(vii) permits credit of additional duty of customs levied under Section 3 of the Customs Tariff Act, 1975. The levy is intended to maintain parity between imported goods and domestically manufactured goods, and the legal fiction created by Section 3 must be applied fully. Conditions attached to excise exemption notifications cannot be imported into the customs regime unless the statute or notification expressly so provides. The concessional rate at which CVD was paid does not alter the character of the levy or create a statutory bar to credit.

Conclusion: CENVAT credit of the concessional CVD was admissible, and denial of such credit was unsustainable in law, in favour of the assessee.

Issue (ii): Whether the demand, invocation of extended period, interest and penalty are sustainable.

Analysis: Once the credit was held admissible, the demand itself had no foundation. In any event, the records showed disclosure of the credit in statutory returns, and there was no material to establish suppression, wilful misstatement, fraud or any deliberate intent to evade duty. The dispute was interpretational, and penalty under Section 11AC of the Central Excise Act, 1944 could not be sustained in the absence of the requisite mens rea. Interest and extended limitation also failed on the same footing.

Conclusion: The demand, extended limitation, interest and penalty were not sustainable, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Credit of additional duty of customs under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 cannot be denied merely because the duty was paid at a concessional rate under a customs notification, and restrictions in excise exemption notifications cannot be read into the customs levy absent express statutory authority.

---