2013 (6) TMI 239 - AT - Central Excise

Cenvat Credit on inputs imported under the DEPB Scheme denied - Additional Duty of Customs (CVD) was adjusted through DEPB and not paid by cash - whether the appellant is eligible to take credit in respect of the CVD paid by debiting in the DEPB as per the provisions of Exemption Notification NO. 45/2002-Cus? - Held that - As decided in Essar Steel Ltd 2004 (8) TMI 123 - CESTAT, NEW DELHI mere debit in DEPB pass book is not sufficient for eligibility of Modvat credit availed on the strength of Bills of Entry wherein importers availed benefit of Notification NO. 34/97-Cus which exempts duties of customs when duty leviable on goods debited to DEPB. As per para 4.3.5 of Exim Policy 2002-07 specifically provides that in case where the Additional Customs duty is adjusted from DEPB no benefit of Cenvat Credit or duty drawback is eligible. In view of the clear provisions of the Exim Policy and in view of the admitted fact no infirmity in the impugned order whereby the demand is confirmed after denying the credit along with interest and penalty. In respect of the time bar, the authorized signatory in his statement stated that the appellants were aware of the fact that as per the Exim Policy no credit is admissible. Further, the appellant has not disclosed the fact that duty has been paid by making debit in the DEPB while denying credit in the monthly return. Thus no infirmity in the order whereby demand is confirmed by invoking the extended period of limitation. Penalty on the managing Director - as the appellant availed benefit of Notification No. 45/2002-Cus and was aware of the Exim Policy appellants were not eligible for credit of duty adjusted from DEPB and this fact was admitted by the Managing Director. Therefore, no ground to interfere with the impugned order imposing penalty on the Managing Director. In favour of revenue.

Summary

Issues involved:
1. Denial of Cenvat Credit on inputs imported under the DEPB Scheme.
2. Time-barred demand due to alleged suppression with intent to evade payment of duty.
3. Eligibility of credit for CVD paid by debiting in the DEPB.
4. Penalty imposed on the Managing Director for availing wrongful credit.

Analysis:

Issue 1: Denial of Cenvat Credit on DEPB Scheme:
The appeal was filed against the confirmed demand, interest, and penalty under the Cenvat Credit Rules. The appellant argued that adjusting CVD through DEPB amounts to payment of duty, citing a Madras High Court decision. However, the Revenue relied on a Tribunal decision favoring them. The issue was whether the adjustment through DEPB qualifies as duty payment, as per the Exim Policy. The Tribunal found the demand justified as per the Exim Policy provisions, denying Cenvat Credit for duty adjusted through DEPB.

Issue 2: Time-barred Demand:
The appellant claimed the demand was time-barred due to the Show Cause Notice being issued beyond the limitation period. They argued that since the credit was reflected in monthly returns, suppression of facts was not proven. However, the Revenue contended that the appellant did not disclose the inadmissible credit, supported by a statement from an individual. The Tribunal upheld the extended limitation period invocation, as the appellant was aware of the Exim Policy provisions.

Issue 3: Eligibility of Credit for CVD paid via DEPB:
The question was whether mere debit in DEPB is sufficient for claiming credit under a Customs Notification. The appellant referenced a Madras High Court decision, but the Tribunal held that mere debit in DEPB pass book does not guarantee eligibility for Modvat credit. The Tribunal found no error in denying credit based on the provisions of the Exim Policy and the admitted facts.

Issue 4: Penalty on Managing Director:
The Managing Director appealed the penalty imposition, claiming reliance on advice and legal position prevailing during the credit availing. However, the Revenue presented a statement where the Managing Director admitted to wrongful credit availing, in line with the Exim Policy. The Tribunal upheld the penalty, concluding that the Managing Director was aware of the ineligibility for credit based on the Exim Policy and the admitted facts.

In conclusion, the Tribunal dismissed the appeals, upholding the demand denial, time-bar invocation, credit ineligibility, and penalty imposition on the Managing Director based on the Exim Policy provisions and the facts presented during the proceedings.