2015 (9) TMI 1268 - HC - Central Excise

CENVAT Credit of CVD paid through DEPB - Whether in the absence of any restriction in the provisions of the Cenvat Credit Rules, 2002 and as in force during the period in dispute, the Tribunal was justified in holding that the appellant was dis-entitled to Cenvat Credit merely on the strength of the Exim policy as in force - Held that - Under the Exemption Notifications, if the importers produced DEPB scrip and availed the exemption for clearance of goods, the goods become non-duty paid goods. The value of DEPB scrip, once used, gets extinguished and hence there would be no question of seeking Cenvat Credit thereafter. - Commissioner (Appeals) as well as the Tribunal relied upon a Larger Bench decision of the CESTAT in ESSAR Steel Limited v. Commissioner 2004 (8) TMI 123 - CESTAT, NEW DELHI . The said decision is not overruled so far by any High Court. But according to the learned counsel for the appellant, the decision of the Larger Bench was watered down to a great extent by this Court in Commissioner of Central Excise v. Spic Limited 2013 (9) TMI 93 - MADRAS HIGH COURT . - Therefore, after a specific prohibition was introduced under the Scheme from 1.4.2000 onwards, it is not possible for the appellant to claim the benefit in respect of the Bill of Entry of the year 2003. Therefore, the decision in Spic, even if it is taken to water down the decision of the Larger Bench in ESSAR Steel Limited, does so only in respect of the period prior to 2000. Therefore, the decision of this Court in Spic is not favourable to the appellant. - Decided against assessee.

Summary

Issues:
- Interpretation of Cenvat Credit Rules, 2002 and Exim Policy
- Entitlement to Cenvat Credit based on DEPB Scheme
- Applicability of Notification No.31/97 and Circular No.5/2005-Cus.
- Impact of DEPB Scheme on Cenvat Credit
- Judicial Precedents on Cenvat Credit and DEPB Scheme

Interpretation of Cenvat Credit Rules, 2002 and Exim Policy:
The appellant, engaged in manufacturing glass bottles, imported raw materials under a Bill of Entry and availed Cenvat Credit. The dispute arose when the Department issued a show cause notice challenging the credit availed. The Tribunal, relying on the Exim Policy, held that Cenvat Credit was not available for additional customs duty discharged using DEPB Scrip. The appellant argued that the Tribunal erred in denying the credit based on the Exim Policy, as the Cenvat Credit Rules, 2002 should govern such matters independently.

Entitlement to Cenvat Credit based on DEPB Scheme:
The Original Authority and the Appellate Commissioner held that the appellant could not claim Cenvat Credit based on the DEPB Scheme unless the Countervailing Duty (CVD) was paid in cash. They relied on the decision in ESSAR Steel Ltd. case. The Tribunal upheld this view, emphasizing the provisions of the Exim Policy. The appellant contended that the Tribunal misapplied the law by not considering the specific provisions of the Cenvat Credit Rules, 2002.

Applicability of Notification No.31/97 and Circular No.5/2005-Cus.:
The Notification No.31/97 exempted imported goods from customs duty and additional customs duty subject to conditions, including the use of DEPB. A Circular clarified the levy of Education Cess on imports under various schemes, stating that duty debited from DEPB Scrip was considered paid. The appellant argued that these notifications supported their claim for Cenvat Credit.

Impact of DEPB Scheme on Cenvat Credit:
The Tribunal's decision was based on the understanding that DEPB Scheme aimed to neutralize customs duty on export products, and the credit was available against export products. The Tribunal held that once DEPB Scrip was utilized, no further Cenvat Credit could be claimed. The appellant contended that the Tribunal's interpretation was flawed and did not consider the specific provisions of the Cenvat Credit Rules, 2002.

Judicial Precedents on Cenvat Credit and DEPB Scheme:
The Tribunal relied on the ESSAR Steel Ltd. case and held that Cenvat Credit was not available for duty discharged using DEPB Scrip. The appellant cited the Precision Pipes case, where the Allahabad High Court emphasized the need for cash payment of additional customs duty under DEPB for Cenvat Credit. The appellant also referenced the Spic Limited case, which discussed the prohibition introduced in the DEPB Scheme from 1.4.2000 onwards, affecting the appellant's claim for Cenvat Credit.

In conclusion, the High Court dismissed the appeal, ruling against the appellant's entitlement to Cenvat Credit based on the DEPB Scheme and the Exim Policy. The Court emphasized the specific provisions of the Cenvat Credit Rules, 2002 and previous judicial decisions, ultimately upholding the Tribunal's decision.