2024 (3) TMI 6 - AT - Central Excise

Recovery of excess CENVAT Credit alongwith interest and penalty - Nature of Duty Paid by 100% Export Oriented Units (EOU) - ineligible credit availed on the duty component of Basic Customs Duty, Education Cess and Secondary Higher Education Cess paid on the iron ore by the 100% EOU as per Sl. No.4 of Notification No.23/2003 CE dt. 31.3.2003 - Time Limitation - Suppression of facts or not - penalty - HELD THAT - A plain reading of the said Sl. No.4, it is clear that the circumstances and corresponding method of computation of duty and quantum required to be paid by an 100% EOU in DTA is different from the duty payable against Sl. No. 2 of the said Notification. Therefore, no doubt the duty paid by an 100% EOU be considered as Excise duty in view of the principle of law settled by the Larger Bench in VIKRAM ISPAT VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III 2000 (8) TMI 111 - CEGAT, NEW DELHI . In the instant case, the department has adopted a wrong basis in denying a portion of the CENVAT credit to the appellant of the duty paid by 100% EOUs, on the ground that component of BCD and applicable EC SHEC on the BCD adopted in computing aggregate duties of Customs, which is nothing but Excise duty being not mentioned in Rule 3(1) of CCR, 2004, hence, not admissible. The said reasoning adopted by the Learned Commissioner in denying a portion of the duty as CENVAT credit cannot be sustained being contrary to the principle of law laid down in Vikram Ispat s case. Time Limitation - Suppression of facts or not - penalty - HELD THAT - From the records of the case, it is clear that the appellants have been availing CENVAT credit on the duty paid by 100% EOU after duly reflecting the same in the relevant monthly ER-1 returns filed with the department periodically and the present demand relates to a portion of CENVAT credit held to be inadmissible. Thus, there are no merit in the allegation of the department that the appellant had suppressed availing of excess amount of CENVAT credit against the duty paid by 100% EOUs reflected in the invoices with an intend to evade payment of duty. Accordingly, the demand confirmed invoking extended period of limitation cannot be sustained. Consequently, the penalty imposed also cannot be sustained. The impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
1. Eligibility to avail CENVAT credit on duty paid by 100% EOU.
2. Whether the demand is barred by limitation.

Summary:

Issue 1: Eligibility to avail CENVAT credit on duty paid by 100% EOU

The appellants, engaged in the manufacture of Pig Iron and Rolled Products, availed CENVAT credit of Rs. 5,42,07,573/- on iron ore received from 100% EOUs during 2012-13 to 2014-15. The Revenue objected, stating that the credit availed on the duty component of Basic Customs Duty (BCD), Education Cess (EC), and Secondary Higher Education Cess (SHEC) of Rs. 2,03,93,277/- was not admissible. The Commissioner held that Rule 3(7)(a) of the CENVAT Credit Rules, 2004 was not applicable, and thus, Rule 3(1) applied, allowing credit only on the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985. The duty paid under the proviso to Section 3(1) of the Central Excise Act, 1944, being an aggregate of BCD and Additional Customs Duty, was not covered under Rule 3(1). The Tribunal, referring to the Supreme Court judgment in CCE vs. Suresh Synthetic and the Larger Bench decision in Vikram Ispat vs. CCE, held that the duty paid by a 100% EOU is considered excise duty, and credit is admissible. Therefore, the denial of credit on the component of BCD, EC, and SHEC was contrary to law.

Issue 2: Whether the demand is barred by limitation

The show-cause notice was issued on 14.3.2018 for recovery of CENVAT credit availed during 2012-13 to 2014-15. The appellant argued that their records were periodically audited by the Department, and the availing of CENVAT credit was disclosed in monthly ER-1 returns. The Tribunal found no material evidence supporting suppression of facts by the appellant. The demand invoking the extended period of limitation was unsustainable, and consequently, the penalty imposed was also unsustainable.

Conclusion:

The impugned order was set aside, and the appeal was allowed with consequential relief. The Tribunal held that the appellants were eligible to avail the entire quantum of duty paid by the 100% EOU as CENVAT credit, and the demand was barred by limitation.