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Judgment
The appellants are engaged in manufacture of Printing and Writing paper and also holds Central Excise registration. They import steam coal which is used by them for generation of steam / electricity which is in turn used in relation to the manufacture of final products. With effect from 1.3.2011, the steam coal was levied with Central Excise duty @ 5% ad valorem vide Notification No.2/2011-CE dt. 1.3.2011. However, concessional rate @ 1% ad valorem was available for steam coal as per Notification No.1/2011-CE dt. 1.3.2011 (Sl.No.28), subject to conditions that such concessional rate of duty shall not apply to goods in respect of which Central Excise duty on inputs or Service Tax on input services has been taken under the provisions of Cenvat Credit Rules, 2004. The appellants paid 2% CVD on the imported coal and availed credit of the said CVD. The department was of the view that in terms of Rule 3 of CCR 2004, such credit is not eligible. SCN was issued proposing to recover the wrongly availed credit along with interest and for imposing the penalties. After due process of law, the original authority confirmed the demands, interests and penalties and imposed penalty. Aggrieved by such orders, the appellant is now before the Tribunal.
Ld. Counsel Shri S. Muthuvenkatraman appeared and argued for the appellant.
He referred torelevant provision in Rule 3 of CCR 2004 which reads as under :
"RULE 3. CENVAT credit- (1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of-
(i) The duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act:
Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods-
(a) in respect of which the benefit of an exemption under Notification No. 1/2011-C.E., dated the 1st March, 2011 is availed; or
(b) specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012-C.E., dated the 17th March, 2012 is availed.
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);
(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);
(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via):"
The department alleges that in terms of Rule 3 (1) (i) to (vii) of CCR 2004, appellants will not be eligible to take cenvat credit of CVD paid on imported steam coal for the reason that the appellants have availed the benefit of Notification No.12/2012-Cus. 17.3.2012.
The notification clearly envisages that the exemption is subject to any other conditions specified in the Annexure to the Notification. The condition number which is mentioned in the corresponding entry in Column No.6 has been complied. No other conditions are mentioned. The appellant has availed the concessional rate of duty under Notification No.12/2012-Cus. which is Customs Notification whereas the bar of taking cenvat credit in the proviso to Rule 3 (1) (i) applies to a Central Excise notification (Notification No.12/2012-CE dt. 17.3.2012).
Ld. Counsel placed reliance on the Board's Circular No.41/2013-Cus. dt. 21.10.2013 which has clarified the intention behind the notification No.12/2012-Cus. dt. 17.3.2012 that would support the case of the appellant. Further that the Regional Advisory Committee of Hyderabad Zone in its meeting held on February 9, 2015 considered this issue and concluded that cenvat credit of Additional duty of Customs paid on imported goods under Customs Notification dt. 17.3.2012 (and not under Central Excise Notification) is available for credit. The relevant portion was referred to by Ld. Counsel as below :
"Minutes of the meeting of the regional advisory committee, Hyderabad zone held on February 09, 2015.
Point No. 1 - Credit on imported coal:-
Many manufactures are importing steam coal on payment of duties. As per Customs Notification No. 12/2012-Cus.they are availing concessional CVD @ 2%. Audit is of the view that since CVD has been paid @ 2% on imported coal, the credit under Cenvat Credit Rules, is not available. Audit is taking a view that CVD in lieu of Excise duty and if 2% duty has been paid on imports the credit is not admissible because a manufacturer who is procuring coal domestically where excise duty has been paid @ 2%, the credit is not available.
Board has issued a circular No.41/2013-Cus. dated 21.10.2013 where it has been clarified that 2% of CVD is "general applied" rate and therefore it is industry's view that credit of CVD is available as per rule 3(1) (vii) of CENVAT credit rules. Please clarify.
Reply:
Since the subject goods were levied at reduced rate of 2% CVD on their importation in terms of section 3 of Customs Tariff Act, 1975 read with Notification issued therein i.e under Notification No. 12/2012-Cus. dated March 17, 2013 (and not under Notification No. 1/2011 CE) which was not excluded from the purview of Rule 3 of CENVAT credit rules, 2004, it appears that the CENVAT credit of CVD paid on imported coal (i.e. 2% adv.) under Notification No. 12/2012- Cus. dated 17.03.2013 is eligible for credit."
Ld. Counsel further submits that the issue is no longer res integra and it has been held in favour of the assessee by the coordinate Bench of the Tribunal in the case of Hindustan Zinc Ltd. Vs CCG & ST Udaipur - 2021 (9) TMI 199-CESTAT New Delhi.
Ld. A.R supported the findings in the impugned order.
Heard both sides.
From the submissions made by the Ld. Counsel as well as after perusal of the decisions, placed before us, we are of the considered opinion that the issue stands covered by the above decision. The bar to take cenvat credit is only when the benefit of exemption specified at Sl.No.67 and 128 under Notification No.12/2012-CE dt. 17.3.2012 is availed. The CCR 2004 does not impose any bar or restriction in availing credit when the benefit of exemption is availed under the Notification No.12/2012-Cus. dt. 17.3.2012. The issue stands decided in the decision of Hindustan Zinc Ltd. (supra). The relevant paragraphs of said decision are reproduced as under :
"6. After hearing both the parties and perusing the record, we are of the opinion as follows :
It is admitted that the appellants have imported coal consequent thereto they have paid 1%/2% on CVD in addition to Basic customs duty. The CVD has been paid at the said exempted rate taking the benefit of Sl. No. 123 of Customs Notification No. 12/2012-Cus., dated 17-3-2012.
It is apparent from the order in challenge that Department has denied the payment of CVD on exempted rate and the availment of Cenvat credit thereupon relying upon the S. No. 67 of Excise Notification No. 12/2012, dated 17-3-2012.
Perusal of both these notifications reveal that the Customs notification is applicable to the imported coal whereas the Excise Notification is applicable to the domestically manufactured goods. The Condition No. 25 of Excise notification which denies availment of Cenvat credit on imports of coal manufactured by the supplier of coal, as has been taken the basis in the order-in-original, shall therefore be applicable for domestically manufactured goods only and not on the imported coal. Perusal of Excise Notification No. 67 further reveals that no such condition is applicable in case of import of coal.
The narrow compass of the adjudication, therefore, remains as to 'whether under Customs notification against S. No. 67 i.e., while importing the coal, the appellants were entitled to avail the Cenvat credit on the amount of CVD paid.
The Cenvat credit is applicable as per Rule 3(1) of the Cenvat Credit Rules, 2004, clause 7 thereof entitles the appellants to avail the Cenvat credit in the given circumstances.
The said Rule itself clarifies that the Cenvat credit of duty of excise is not allowed to be taken when paid on any goods specified under S. Nos. 67 and 128 of Excise Notification No. 12/2012, dated 17-3-2012. Admittedly, the notification relied upon by the department for denying the impugned benefit to the appellant is Customs Notification No. 12/2012, dated 17-3-2012. The restriction of Rule 3 is not applicable to the said notification. Above all, the Hon'ble Supreme Court in the case of SRF Ltd. v. CC Chennai [2015 (318) E.L.T. 607 (S.C.)] has held that Excise Notification No. 12/2012 is applicable only in respect of any digged or manufactured coal and not in respect of imported coal. The import whereof is allowed to have exempted rate of CVD vide Customs Notification No. 12/2012-Cus.
In view of the entire above discussion, we are of the firm opinion that the adjudicating authority has committed a legal error while denying the benefit of reduced CVD on imported coal while placing reliance upon the Excise notification for manufacture of coal. Order is therefore, held not sustainable and accordingly, is hereby set aside. Resultantly, the appeal stands allowed."
Following the said decision, we are of the considered opinion that the demand cannot sustain. The impugned orders are set aside. Appeals are allowed with consequential relief, if any, as per law.
(Operative part of the order pronounced in court on 22.09.2021)