2009 (8) TMI 934 - AT - Central Excise

Summary

Issues: Admissibility of Cenvat credit against discharge of additional customs duty through DEPB credit earned under Exim Policy 2003-07.

Analysis:
1. The appellant contended that the impediments to grant Cenvat credit against the discharge of additional customs duty through DEPB credit were removed by Notification No. 28 (RE-2003)/2002-07 dated 28-1-04. The appellant argued that the deletion of a specific sentence in a relevant notification allowed for the treatment of duty discharged using DEPB credit as duty paid, entitling the assessee to Cenvat credit. The appellant emphasized that there was confusion in the implementation of the Exim Policy incentive scheme, and there was no intention to avail Cenvat credit wrongly. The demand disallowing Cenvat credit and imposing penalties was challenged on these grounds.

2. The Departmental Representative argued that the issue revolved around the admissibility of Cenvat credit when additional customs duty was not paid but adjusted through DEPB credit, citing Exim Policy 2003-07. The contention was that the appellant was not entitled to the incentive under the policy, making the claim for Cenvat credit unlawful. The adjudicating authority and appellate orders were supported based on this premise.

3. The Tribunal examined the records and the case details. It was noted that the appellant received a quantity of Heavy Melting Scrap under a specific Bill of Entry, with additional customs duty not paid in cash but adjusted through DEPB credit. Both authorities disagreed with the appellant's claim for Cenvat credit, citing the improper manner of duty discharge. However, a subsequent notification removed the impediment of denying Cenvat credit for duty discharged through DEPB after the import by the appellant. The Tribunal acknowledged this as a mitigating factor but emphasized that the removal of the embargo was not retrospective without legislative intent. Consequently, the appellant was not granted concession regarding the disallowance of Cenvat credit.

4. Regarding the penalties imposed, the Tribunal decided to waive the penalty amount equal to the disallowed Cenvat credit, considering relief granted to similarly situated cases through the January 2004 notification. However, the penalty of Rs. 50,000 for violation of Cenvat Credit Rules was upheld due to the appellant's undue benefit availed over a prolonged period. The interest liability, if any, was to follow as per the adjudication order.

5. In conclusion, the Tribunal partly allowed the appellant's appeal by confirming the disallowance of Cenvat credit but waiving the penalty amount equivalent to the disallowed credit while upholding the penalty for the violation of Cenvat Credit Rules.