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2014 (2) TMI 766 - AT - Central ExciseCENVAT Credit - Duty paying document - Additional CVD paid on TR-6 Challan being differential duty - Held that - A combined reading of Rule 11 (3), Rule 11 (7) of Central Excise Rules 2002 and Rule 9 (a)(ii) of the CENVAT Credit Rules, 2004 will convey that in case of sale of imported goods by a first stage dealer or second stage dealer also the credit is admissible on the basis of such a sale invoice. A similar situation will exist for supplementary invoice issued by a first stage dealer/second stage dealer under Rule 9 (1) (b) of CENVAT Credit Rules, 2004. The word Challan and any other similar document evidencing payment of additional CVD, mentioned in Explanation to Rule 9 (1)(B), will thus mean those situations where duty is paid under a challan by an importer/dealer of imported goods who has sold the cenvatable goods. In the present facts and conditions of the case, it has to be held that payment of differential duty was paid as a result of re-assessments with respect to imported capital goods as per law laid down by Delhi CESTAT in the case of Birla Jute Manufacturing Co. Ltd Vs CC Calcutta (1983 (8) TMI 253 - CEGAT, NEW DELHI). In Para-7 of this judgment, inter alia, it was held that refund claims and demands under Section 27 & Section 28 of the Customs Act, 1962 do involve re-assessment of the duty originally assessed. When additional duty is paid under re-assessment or on being pointed out by the Revenue then the credit of such duty paid will be admissible as CENVAT Credit to the appellant under Rule 9(1)(c) of the CENVAT Credit Rules, 2004. In view of the above settled position of law, the credit was rightly availed by the appellant and accordingly the appeal filed by the appellant is required to be allowed. Once on merits the issue is decided in favour of the appellant, there is no question of imposing penalty and confiscation of capital goods as adjudicated by the lower authority - Decided in favour of assessee.
Issues Involved:
1. Denial of CENVAT Credit of Rs. 3,15,85,715/-. 2. Imposition of penalty and redemption fine. 3. Applicability of Rule 9 of CENVAT Credit Rules, 2004. 4. Re-assessment and differential duty payment. 5. Admissibility of CENVAT Credit on differential CVD. 6. Fraud, suppression, and mis-statement allegations. 7. Time bar and extended period applicability. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit of Rs. 3,15,85,715/-: The appellant, M/s Essar Oil Ltd, was denied CENVAT Credit amounting to Rs. 3,15,85,715/- along with interest recovery and an equivalent penalty under Rule 14 of the CENVAT Credit Rules, 2004. The denial was based on the differential CVD paid, which was linked to a fraud/suppression case. 2. Imposition of Penalty and Redemption Fine: A penalty equal to the denied CENVAT Credit amount and a redemption fine of Rs. 50 lakhs on the capital goods were imposed. The appellant contested these penalties, arguing that the credit was correctly availed and thus penalties were not warranted. 3. Applicability of Rule 9 of CENVAT Credit Rules, 2004: The core issue was whether the CENVAT Credit of Rs. 3,15,85,715/- was admissible under Rule 9(1)(c) of the CENVAT Credit Rules, 2004. The appellant argued that the credit was valid as it was based on reassessment and differential duty paid, which should be covered under Rule 9(1)(c). The respondent contended that the payments were made under supplementary invoices due to fraud, invoking Rule 9(1)(b). 4. Re-assessment and Differential Duty Payment: The case involved reassessment of duty on imported capital goods. Initially, the goods were assessed at a 10% CVD rate, but due to insufficient funds, the duty was paid later when higher rates were applicable. The differential duty was paid following a Supreme Court order, and the appellant took CENVAT Credit on this differential duty. 5. Admissibility of CENVAT Credit on Differential CVD: The appellant argued that the differential CVD paid should be eligible for CENVAT Credit under Rule 9(1)(c), supported by precedents like Birla Jute Manufacturing Co. Ltd vs. CC Calcutta and CCE Raipur vs. Ambuja Cement Eastern Ltd. They claimed that the procedural provisions of Rule 9 should not override the substantive right to credit under Rule 3 of the CENVAT Credit Rules, 2004. 6. Fraud, Suppression, and Mis-statement Allegations: The respondent highlighted that the Supreme Court had previously determined that the duty was paid due to fraud/suppression with intent to evade duty. Therefore, under Rule 9(1)(b), the credit was not admissible as it involved supplementary invoices issued due to fraud. 7. Time Bar and Extended Period Applicability: The appellant argued that the extended period for demand was not applicable as they had filed the necessary declarations and reflected the credits in their returns. They cited the Apex Court's decision in CCE vs. Champher Drugs & Liniments to support their argument against the extended period applicability. Conclusion: The Tribunal concluded that the payment of differential duty was a result of reassessment and not supplementary invoices, thus falling under Rule 9(1)(c). The credit was deemed admissible, and the appeal was allowed. Consequently, the penalties and redemption fine were set aside as the issue was resolved in favor of the appellant on merits.
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