2008 (3) TMI 282 - AT - Central Excise

Credit availed on the additional customs duty adjusted by debit in the DEPB Scheme appellant availed benefit of Not. no. 34/97 by adjustment in DEPB pass book - appellant submits that there was bona fide belief supported by the Tribunal ruling (in the case of Polyhose India Pvt. Ltd.) to avail Cenvat credit - Therefore he cannot be held to have suppressed facts for invocation of larger period - revenue is entitled to recover the amount only for normal period penalty set aside

Summary

Issues:
1. Denial of Cenvat credit on additional customs duty adjusted in DEPB Scheme.
2. Retrospective effect of subsequent notification.
3. Invocation of larger period for demand due to alleged suppression of facts.

Analysis:
1. The appeal challenged the denial of Cenvat credit on additional customs duty adjusted in the DEPB Scheme. The Commissioner relied on a Larger Bench judgment in the case of M/s. Essar Steels Ltd. v. CCE, Visakhapatnam, which held that availing Modvat credit is not permissible if the importer pays customs duties in part by cash. The appellant argued that a subsequent notification granted the benefit retrospectively. However, the Tribunal upheld the denial of benefit based on the principle established in the Essar Steels case.

2. The appellant contended that during the relevant period, they availed Cenvat credit based on a Tribunal ruling in the case of Polyhose India Pvt. Ltd., indicating a bona fide belief in availing the credit. The appellant sought to restrict demands within the normal period, citing judgments such as Mentha & Allied Products Ltd. v. CCE, Meerut, CCE, Trichy v. Grasim Industries Ltd., and SLM Glass Works v. CCE, Bangalore, where the benefit of the time bar was granted in cases with conflicting views between Tribunals and High Courts. The Tribunal acknowledged the appellant's bona fide belief supported by the Tribunal rulings and modified the demand to the normal period, setting aside penalties.

3. The Tribunal agreed with the Department's argument that the subsequent amendment granting Cenvat credit on DEPB passbook deposits had only prospective effect. However, it found that the appellants did not suppress facts as they acted under a bona fide belief supported by Tribunal rulings. Therefore, the allegation of suppression was deemed unreasonable, and the revenue was entitled to recover the amount for the normal period only. The impugned order was modified accordingly, and penalties were set aside in line with Supreme Court judgments cited by the appellant's counsel. The appeal was allowed on these terms.