2009 (9) TMI 839 - AT - Central Excise

Cenvat credit of SAD discharged on imports using the DEPB credit - Held that - The credit availed pertains to SAD levied in terms of sub-section (5) of Section 3 of the Customs Tariff Act. Therefore as per the above provision in the Notification the respondents cannot be denied the Cenvat credit equivalent to the DEPB credit debited towards SAD levied under sub-section (5) of Section 3 of the Customs Tariff Act - the provisions of the Notification and the clarification issued by the CBEC - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Admissibility of Cenvat credit of Special Additional Duty (SAD) on imports using DEPB credit.
2. Interpretation of relevant Notifications and Circulars regarding Cenvat credit eligibility.

Analysis:
1. The appeal by the Revenue challenged the Commissioner (Appeals) decision vacating the demand for irregularly availed Cenvat credit of SAD and the penalty imposed on the respondents. The original authority found the respondents had taken inadmissible credit of SAD as no Special Additional Duty was paid in cash during the material period. However, the Commissioner (Appeals) relied on Circular No. 18/2006-Cus., stating that the DEPB credit used by the respondents for duty payment could be considered for Cenvat credit. The Commissioner found no irregularity in the availing of Cenvat credit of SAD, leading to the dismissal of the demand and penalty.

2. The Revenue contended that the Commissioner wrongly allowed the Cenvat credit of SAD levied under Sub-section (5) of Section 3 of the Customs Tariff Act, stating that there were no corresponding provisions in the Cenvat Credit Rules enabling the credit. The Commissioner's reliance on the Finance Minister's Budget Speech and Foreign Trade Policy was deemed incorrect, as Circular No. 18/2006-Cus. clarified that DEPB credit could only be taken as drawback, not as Cenvat credit. The Revenue sought to set aside the impugned order based on these arguments.

3. The central issue revolved around the admissibility of Cenvat credit of SAD discharged on imports using DEPB credit. The relevant Notification No. 96/2004-Cus. allowed an importer to avail Cenvat credit against the amount debited in the Duty Entitlement Pass Book for additional duty leviable under Section 3 of the Customs Tariff Act. The Tribunal held that the respondents were entitled to Cenvat credit equivalent to the DEPB credit debited towards SAD levied under Sub-section (5) of Section 3 of the Customs Tariff Act. The Tribunal found the impugned order consistent with the Notification and CBEC's clarification, thus upholding the decision of the Commissioner (Appeals) and dismissing the Revenue's appeal.