Facts of the Case

The respondent, M/s Shyam Steel Industries Limited, is engaged in the manufacture of Sponge Iron, Billets and TMT Bars. During the departmental audit for FY 2013-14, the department alleged that the assessee had wrongly availed CENVAT Credit on Additional Duty of Customs (Countervailing Duty/CVD) paid at the concessional rate of 1%/2% on imported coal.

A Show Cause Notice dated 03.03.2016 was issued proposing reversal of CENVAT Credit along with recovery of interest and imposition of penalty. The adjudicating authority confirmed the demand. Although the Commissioner (Appeals) partly allowed the appeal, the denial of credit, interest and penalty was substantially upheld.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, subsequently allowed the assessee's appeal, holding that CENVAT Credit was admissible. Aggrieved by the Tribunal's decision, the Revenue filed an appeal before the Calcutta High Court under Section 35G of the Central Excise Act, 1944.

Issues Involved

  1. Whether CENVAT Credit is admissible on concessional Additional Duty of Customs (CVD) paid at 1%/2% on imported coal under Notification No. 12/2012-Cus. and Notification No. 12/2013-Cus.
  2. Whether the restriction applicable to domestic excise duty under Notification No. 12/2012-CE also applies to concessional CVD paid on imported coal.
  3. Whether Rule 3 of the CENVAT Credit Rules, 2004 bars availment of CENVAT Credit on such concessional CVD.

Petitioner's (Revenue's) Arguments

  • Rule 3(1)(i) of the CENVAT Credit Rules restricts availment of credit where concessional excise duty under Notification No. 12/2012-CE has been availed.
  • Countervailing Duty (CVD) is equivalent to excise duty and therefore the same restrictions applicable to excise duty should automatically apply to concessional CVD.
  • The adjudicating authority correctly interpreted the expression "equivalent" to mean that CVD should be treated on par with excise duty for all purposes.
  • Allowing CENVAT Credit on concessional CVD would defeat the legislative purpose behind imposing Countervailing Duty.

Respondent's (Assessee's) Arguments

  • Notification No. 12/2012-Cus. contains no restriction denying CENVAT Credit on concessional CVD paid on imported coal.
  • Rule 3(1)(vii) specifically permits credit of CVD and the restrictions contained in Rule 3(1)(i) relating to domestic excise duty cannot be imported into customs notifications by implication.
  • CBEC Circular No. 41/2013-Cus. clearly clarified that concessional CVD at 2% could be availed simultaneously with concessional Basic Customs Duty and no restriction existed on availment of CENVAT Credit.
  • Several Tribunal decisions had consistently held that CENVAT Credit cannot be denied on concessional CVD paid under Notification No. 12/2012-Cus.

Court Findings / Order

The Calcutta High Court dismissed the Revenue's appeal and upheld the Tribunal's order in favour of the assessee.

The Court held that:

  • Notification No. 12/2012-Cus. does not impose any restriction on availment of CENVAT Credit on imported coal.
  • The restriction contained in Notification No. 12/2012-CE applicable to domestic excise duty cannot be read into the customs notification.
  • Rule 3(1)(vii) independently permits availment of credit of Countervailing Duty.
  • Taxing statutes require strict interpretation and restrictions cannot be imported by implication.
  • CBEC Circular No. 41/2013-Cus. also supports the view that concessional CVD under Notification No. 12/2012-Cus. is eligible for CENVAT Credit.
  • The Tribunal had correctly relied upon several earlier judicial precedents including Hindalco Industries Ltd., Aarti Industries Ltd., Asahi Songwon Colors Ltd., Shree Cement Ltd., SRF Ltd. and Tamil Nadu Newsprint & Papers Ltd.

Accordingly, the substantial questions of law were answered against the Revenue and the appeal was dismissed.

Important Clarification

  • Concessional Countervailing Duty (CVD) paid under Notification No. 12/2012-Cus. does not automatically attract restrictions applicable to concessional excise duty under Notification No. 12/2012-CE.
  • Rule 3(1)(vii) of the CENVAT Credit Rules independently governs admissibility of CVD credit.
  • Restrictions contained in one notification cannot be imported into another notification unless expressly provided.
  • CBEC Circular No. 41/2013-Cus. reinforces that concessional CVD on imported coal remains eligible for CENVAT Credit.
  • The judgment reiterates the settled principle that taxing statutes must be interpreted strictly and no implied restriction can be introduced.

Important Case Laws Referred

  • Hindalco Industries Ltd. vs GST, Bhopal
  • CCE & ST, Surat-I vs Aarti Industries Ltd.
  • Asahi Songwon Colors Ltd. vs CCE & ST, Vadodara
  • Commissioner of Central Excise, Customs & CGST vs Shree Cement Ltd.
  • SRF Ltd. vs Commissioner of Customs, Chennai
  • Tamil Nadu Newsprint & Papers Ltd. vs Commissioner of GST & Central Excise
  • Jaypee Sidhi Cement Plant vs CCGST, Customs & Excise
  • Chandrakala Trivedi vs State of Rajasthan & Others

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785395377_2337compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.