2025 (3) TMI 779 - HC - Central Excise

Rejection of claim of the Petitioner for CENVAT Credit of the countervailing duty (CVD) paid on the imported capital goods - whether the Petitioner can avail CENVAT Credit for the CVD qua the imported capital goods in terms of Rule 4 of the CENVAT Credit Rules 2004? - HELD THAT - In Osram Surya 2002 (5) TMI 49 - SUPREME COURT the Supreme Court was seized with the question whether manufacturers who had imported goods prior to the amendment to Rule 57-G of the Central Excise Rules 1944 could claim MODVAT credit post the said amendment. Vide the amendment to Rule 57-G the manufacturers could avail credit only within a period of six months from the date of issuance of documents mentioned in the proviso to the said Rule. Relying on the said amendment the claims of the Appellants therein were rejected by the revenue authorities as being time barred. The Appellants challenged the said decision. In the said challenge the Supreme Court held that credit cannot be sought beyond the period of six months though the import was made prior to the amendment. Further the manufacturers vested rights prior to the amendment in claiming the credit was held not to be affected by the amendment. However the said amendment did limit the time within which the same could be claimed. The Supreme Court also clarified the retrospective and prospective effect of the said amended proviso to Rule 57-G of the 1944 Rules. Thus as per the Supreme Court the limitation introduced via amendment to the Rule 57G would be applicable against any manufacturer claiming credits after the said amendment came into force. In Philips India 2005 (2) TMI 399 - CESTAT MUMBAI the CESTAT Mumbai was dealing with similar facts wherein the Appellant therein had imported certain capital goods under the EPCG Scheme and failed to fulfill the export obligations under the said scheme. The goods were exported in the year 1994-1995 and the applicable duty was paid only after the order of the Settlement Commission. Thereafter a claim was raised for CENVAT Credit in May 2003 which was rejected by the Commissioner of Customs inter alia on the ground that the same is time barred. In Global Ceramics 2019 (5) TMI 1432 - DELHI HIGH COURT the Court was dealing with CENVAT Credit in respect of inputs for the domestic market which is governed by Rule 4 (1) of the CENVAT Credit Rules. In the present case the Court is dealing with CENVAT Credit in respect of capital goods under Rule 4 (2) of the CENVAT Credit Rules. Further it is noted that the Court did not discuss the decision of the Supreme Court in Osram Surya (supra) wherein it is clearly held that the second proviso to Rules 57-G of the 1944 Rules (which is identical to the third proviso to Rule 4 of the CENVAT Credit Rules) would be applicable qua manufacturers claiming credit after introduction of the said proviso. Thus the limitation introduced via the amendment would affect any claim raised after the amendment came into effect. In the facts of the present case the Petitioner did not by itself voluntarily deposit the duty and penalty. The admitted position is that out of nine EPCGs qua four EPCGs the export obligation was not fulfilled. A substantial period of time i.e. 8 years was given to the Petitioner for fulfilling its export obligations. Extension of two years was also given qua certain EPCGs. After the said extended period had also expired the show cause notice was issued. The DRI then started investigation in respect of the unfulfilled export obligation. Even at that stage the customs duty along with interest was not paid by the Petitioner. Only after the investigation was started the Petitioner tendered the said amount in order to avoid prosecution and approach the Settlement Commission. The confiscation of goods also could not also take place as the goods were no longer available for confiscation which is clearly captured in the order of the Settlement Commission. Conclusion - i) The Settlement Commission s order is correct and that the Petitioner s claim for CENVAT Credit is rightfully rejected as time-barred. ii) The Settlement Commission s decision upheld emphasizing the finality of settlement proceedings under Section 127 (j) of the Customs Act. The Settlement Commission s order does not warrant any interference - Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the Petitioner could avail CENVAT Credit for the Countervailing Duty (CVD) paid on imported capital goods under Rule 4 of the CENVAT Credit Rules, 2004, despite the claim being made long after the statutory period had lapsed.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework involved the interpretation of Rule 4 of the CENVAT Credit Rules, 2004, which stipulates conditions for availing CENVAT Credit. Specifically, the third proviso to Rule 4 (1) introduced a time limit, initially of six months, later extended to one year, within which the credit must be claimed. This amendment was enacted via Notification No. 21/2014-Central Excise (N.T.) dated 11th July 2014.

Precedents considered included the Supreme Court's decision in Osram Surya (P) Ltd. v. CCE, Indore, which held that procedural restrictions like time limits for claiming credit are permissible and do not affect vested rights. The Court also considered the case of Global Ceramics Pvt. Ltd. v. The Principal Commissioner of Central Excise, Delhi -1, which dealt with the retrospective application of amendments to procedural rules.

Court's Interpretation and Reasoning

The Court interpreted the relevant provisions to mean that while the right to claim CENVAT Credit is a vested right, the time within which this right must be exercised is subject to statutory limitations. The Court noted that the amendment introducing the time limit was procedural and did not affect the substantive right to credit, aligning with the Supreme Court's reasoning in Osram Surya.

Key Evidence and Findings

The Petitioner imported capital goods under the EPCG Scheme but failed to fulfill export obligations for four out of nine authorizations. Consequently, the Directorate of Revenue Intelligence (DRI) initiated an investigation, leading to a show cause notice and eventual settlement proceedings. The Petitioner paid the differential duty and interest in 2018, well beyond the statutory period for claiming CENVAT Credit.

Application of Law to Facts

The Court applied the legal framework to the facts, emphasizing that the Petitioner's claim for CENVAT Credit was time-barred under the amended Rule 4 (1). The Petitioner's reliance on precedents like Philips India Ltd. v. Commissioner of Central Excise was deemed inapplicable as the facts differed, particularly regarding the timing of the duty payment and the procedural amendments.

Treatment of Competing Arguments

The Petitioner argued that the amendment should not apply retrospectively and cited various precedents and CBIC Circulars to support their position. However, the Court found these arguments unpersuasive, emphasizing that the procedural amendment applied to claims made after its enactment, regardless of when the capital goods were imported.

The Respondent's argument that the Petitioner's claim was time-barred was upheld, with the Court agreeing that the Settlement Commission rightly rejected the claim for CENVAT Credit.

Conclusions

The Court concluded that the Petitioner could not claim CENVAT Credit for the CVD paid on the imported capital goods as the claim was made beyond the statutory time limit. The procedural amendment introducing the time limit was applicable, and the Petitioner's failure to fulfill export obligations and timely pay the duty precluded them from availing the credit.

3. SIGNIFICANT HOLDINGS

The Court upheld the Settlement Commission's decision, emphasizing the finality of settlement proceedings under Section 127 (j) of the Customs Act. The Court reiterated that procedural amendments imposing time limits are valid and applicable to claims made post-amendment.

Core Principles Established

The judgment reinforced the principle that while substantive rights to tax credits may exist, the exercise of these rights is subject to procedural limitations, including statutory time limits. The Court underscored the importance of adhering to procedural rules to maintain the integrity and finality of settlement proceedings.

Final Determinations on Each Issue

The Court dismissed the petition, affirming that the Settlement Commission's order was correct and that the Petitioner's claim for CENVAT Credit was rightfully rejected as time-barred. The Court emphasized that the procedural amendments to the CENVAT Credit Rules were applicable and binding.