cenvat credit of customs duty paid due to non fulfillment of export obligation in respect of capital goods imported under EPCG on 06/2012.

[bk r]

Respected sir

Sir, Capital goods were imported in 06/2012 under EPCG scheme without payment of BCD,CVD,SAD etc . but we could not fulfill the export obligation and DGFT directed us to pay the Customs duty, CVD and SAD before cancellation of the licence . We pay the same alongwith interest in june 2017. We availed 50% cenvat credit in the month of June 2017 and remaining 50% of credit was availed in July 2017 after GST. Now the department is denying the cenvat credit on the following grounds:

1. THE CENVAT CREDIT IS NOT ADMISSIBLE AFTER ONE YEAR FROM THE DATE OF ISSUANCE OF THE DOCUMENT AS PER THE CENVAT CREDIT RULES 2004. IN OUR CASE DOCUMENT I.E. BILL OF ENTRY IS OF JUNE 2012 .

2.WE REQUESTED THE DEPARTMENT TO CONSIDER THE DUTY PAYMENT DOCUMENT I.E. CHALLA N AS SUPPLEMENTARY INVOICE BUT DEPARTMENT IS NOT ACCEPTING IT AS SUPPLEMENATRY INVOICE . THEIR PLEA IS THAT SUPPLIMENTARY INVOICES IS FOR ADDITION AMOUNT OF ADDITIONAL DUTY OF CUSTOMS/eXCISE AND IN THIS CASE THE CHALLAN IS NOT FOR THE ADDITIONAL DUTY IT IS FOR THE INITIAL DUTY and it does not fall under the supplimentray invoice

3. THAT WE PAID THE DUTY DUE TO NON FULFILL OF THE EXPORT OBLIGATION ON THE DIRECTION OF THE DGFT AND NOT SUOMOTO THEREFORE THE CENVAT CREDIT IN R/O GOODS IMPORTED IN jUNE 2012 IS NOT ADMISSIBLE.

please guide whether the department contention is correct and they can deny the cenvat credit on the above said grounds.

[KASTURI SETHI]

You can get the relief through litigation only. I am of the view that you can win the case. Case laws can be traced out in your favour. Date of payment and date of issuance of directions by DGFT also have legal force. You will have to fight the case legally.

[YAGAY andSUN]

In our view CENVAT credit is not allowed in such scenarios since export obligation was not fulfilled and duty was paid as per the provisions of FTP as penalty actions.

AI Summary

Cenvat credit admissibility questioned where duty paid for unfulfilled export obligation; characterization of payment is decisive. Dispute whether cenvat credit may be claimed for customs duty paid after non-fulfilment of EPCG export obligation where department relies on (i) one year limitation from bill of entry, (ii) challan not qualifying as a supplementary invoice since it records initial duty, and (iii) payment being penalty-like under DGFT/FTP directions.