2017 (7) TMI 19 - AT - Central Excise

CENVAT credit - inputs received from 100% EOU - whether additional duty paid under Section 3(5) i.e. SAD is includible in CVD in terms of Rule 3(7) of the Credit Rules and credit of same can be availed on inputs received from a 100% EOU unit? - Held that - Reliance was placed on the decision of the Hon ble Tribunal in the case of Sri Venkateshwara Precision Components v. CCE, Chennai 2010 (8) TMI 243 - CESTAT, CHENNAI , where it was held that from 1-3-05, the additional duty levied under Section 3(5) has also been made eligible for credit, it would be proper to hold that the term CVD referred to in the formula would refer to both varieties of additional duties leviable under Section 3(1) and 3(5) of the Customs Tariff Act, 1975 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of excess Cenvat credit on inputs procured from a 100% EOU.
2. Interpretation of Rule 3(7) of the Cenvat Credit Rules, 2004 regarding the inclusion of SAD in CVD for availing Cenvat credit.
3. Admissibility of credit of SAD as Cenvat credit on inputs received from a 100% EOU unit.

Analysis:
1. The Appellant was found to have availed excess Cenvat credit on inputs procured from a 100% EOU during the relevant period, leading to a demand of ?67,15,458 as per the Show Cause Notice issued on various grounds including contravention of Rule 3(1) of the Cenvat Credit Rules, 2004.

2. The dispute revolves around the interpretation of Rule 3(7) of the Cenvat Credit Rules, 2004 regarding the inclusion of Special Additional Duty (SAD) in Countervailing Duty (CVD) for availing Cenvat credit. The Commissioner held that SAD is part of CVD and can be availed as Cenvat credit only from the date of amendment in Rule 3(7) vide Notification No.22/2009, resulting in a recoverable balance of ?38,48,227 even after reversing a portion of the credit.

3. The Appellant argued that even before the amendment, Cenvat credit should be admissible on the SAD portion, as both duties under Section 3(1) and 3(5) of the Customs Tariff Act are covered under 'additional duty of customs'. The Appellant relied on a previous Tribunal decision which held that CVD in Rule 3(7) includes both additional duties leviable under Section 3(1) and 3(5) of the Customs Tariff Act, thereby justifying the availment of credit on SAD.

4. The Tribunal, following the precedent set by previous decisions, allowed the appeal and set aside the impugned order. It was held that the term CVD in Rule 3(7) encompasses both types of additional duties under Section 3(1) and 3(5) of the Customs Tariff Act, thereby entitling the Appellant to avail Cenvat credit on SAD as well. The Tribunal also accepted the Appellant's arguments against the extended period for demand and penalty imposition, as the appeal was allowed on merits.