2010 (5) TMI 445 - AT - Central Excise

Cenvat credit on countervailing duty export obligation not fulfilled Settlement Commission directed for payment of 85% of duty liability and directed cenvat credit of CVD Dept not including BCD for calculation of CVD Cenvat credit allowed of CVD calculated by including BCD

Summary

Issues:
1. Calculation of Additional Customs Duty component and eligibility for Cenvat credit.

Analysis:
The case involved a manufacturer of polyester staple fibre who imported capital goods under the Export Promotion Capital Goods Scheme (EPCG Scheme) at a concessional rate of duty. The manufacturer failed to meet the export obligation, leading to a demand for the payment of total differential duty along with interest. The manufacturer admitted their duty liability before the Settlement Commission, which finalized the duty liability. The central issue revolved around the calculation of the Additional Customs Duty component and the eligibility for Cenvat credit concerning the duty paid.

The Appellants contended that there was a mistake in the Department's calculation of the Additional Customs duty, as the basic customs duty was not included in the assessable value, affecting the calculation. The Appellants argued that the differential Additional Customs duty should be higher if calculated correctly. On the other hand, the Department defended its calculation method, supporting the findings of the Commissioner (Appeals) regarding the duty calculation and Cenvat credit eligibility.

The Tribunal analyzed the provisions of the Indian Customs Tariff Act, 1975, related to the assessment of Additional Customs duty on imported goods. It noted that the assessable value for Additional Customs duty at an ad-valorem rate should include the assessable value of the goods plus the basic customs duty. Considering the total assessable value of the imported goods and the duty payable without any exemption, the Tribunal calculated the differential duty payable in case of a shortfall in meeting the export obligation. As the manufacturer met only 17.45% of the export obligation, the duty liability was determined at 82.55% of the total duty demand. Consequently, the Tribunal broke down the duty liability into basic customs duty and Additional Customs duty components, allowing the Cenvat credit for the correct amount of Additional Customs duty paid. The Tribunal ruled in favor of the Appellants, modifying the order to grant them the entitled Cenvat credit.

In conclusion, the Tribunal resolved the issue by clarifying the correct calculation method for the Additional Customs duty component and upheld the Appellants' entitlement to the Cenvat credit. The judgment highlighted the importance of accurate duty assessment and compliance with export obligations under the EPCG Scheme.