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2020 (10) TMI 1032 - AT - Central ExciseCENVAT Credit - additional duty of customs paid - rule 3 (1)(vii) of the CENVAT Credit Rules - Customs duty of excise duty - concessional rate of tax under Customs Notification dated March 17, 2012 - extended period of limitation - levy of interest and penalty. HELD THAT - It is not in dispute that both Hindustan Zinc and Ultratech Cement paid additional duty of Customs under section 3 (1) of the Customs Tariff Act, after availing the benefit of the Customs Notification dated March 17, 2012 and that they also availed CENVAT credit of the additional duty of customs so paid under rule 3(1)(vii) of the CENVAT Credit Rules. This availment of CENVAT credit has been denied to them for the reason that the additional duty of customs paid @ 2% was not the duty of excise as specified in the Excise Tariff Act and so CENVAT credit of the additional duty of customs paid under the Customs Notification dated March 17, 2012 have been wrongly availed. A bare perusal of rule 3(1)(i) indicates that a provider of output service shall be allowed to take CENVAT credit of the duty of excise specified in the First Schedule to the Excise Tariff Act specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act subject to the two conditions mentioned in proviso (a) (b). However, rule 3(1)(vii) provides that a provider of output service shall be allowed to take credit of the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via) - The Commissioner has mixed up rule 3(1)(i) and rule 3(1)(vii) of rule 3 of the CENVAT Credit Rules. It is for this reason that the conditions specified in rule 3(1)(i) have also been imported into rule 3 (1)(vii) of the CENVAT Credit Rules. In the first instance, Hindustan Zinc had not paid duty of excise specified in the First Schedule of the Excise Tariff Act, nor it had availed the benefit of the Central Excise Notification dated March 1, 2011 or that specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Central Excise Notification dated March 17, 2012 had been availed. In fact, Hindustan Zinc had paid additional duty of customs by availing the benefit under serial number 122A/123 of the Customs Notification dated March 17, 2012. It is because of this misreading of rule 3(1) of the CENVAT Credit Rules that led the Commissioner to commit an error - The Commissioner, therefore, committed an illegality in denying the benefit of CENVAT credit to Hindustan Zinc. On the other hand, the Commissioner (Appeals), in the matter of Ultratech Cement, after considering the provisions of rule 3 of the CENVAT Credit Rules and the decision of the Tribunal in M/S HINDALCO INDUSTRIES LTD. APPELLANT VERSUS GST, BHOPAL RESPONDENT 2018 (3) TMI 1124 - CESTAT, NEW DELHI and the Minutes of the Meeting of the Regional Advisory Committee of Hyderabad Zone held on February 9, 2015, held that Ultratech Cement was justified in taking the CENVAT credit. The Commissioner (Appeals) also found that the judgment of the Gujarat High Court inLONSENKIRI CHEMICALS INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS AND SERVICE TAX, VADODARA-I 2018 (9) TMI 1439 - GUJARAT HIGH COURT would not be applicable to the facts of the case. Thus, there is no error in the order passed the Commissioner (Appeals) in the matter of Ultratech Cement - appeal allowed.
Issues Involved:
1. Whether CENVAT credit of additional duty of customs paid at 2% ad valorem is admissible under rule 3(1)(vii) of the CENVAT Credit Rules. 2. Whether the conditions specified in rule 3(1)(i) of the CENVAT Credit Rules are applicable to rule 3(1)(vii). 3. Whether the extended period of limitation under section 11A(4) of the Customs Act is invokable. 4. Whether penalty and interest could be imposed. Detailed Analysis: Issue 1: Admissibility of CENVAT Credit of Additional Duty of Customs Hindustan Zinc and Ultratech Cement both paid additional duty of customs at 2% ad valorem under section 3(1) of the Customs Tariff Act and availed CENVAT credit under rule 3(1)(vii) of the CENVAT Credit Rules. The Department issued show cause notices proposing to disallow this credit, arguing that the additional duty of customs paid at 2% was not the duty of excise specified in the Excise Tariff Act. However, the Tribunal noted that rule 3(1)(vii) allows credit of additional duty of customs equivalent to the duty of excise specified under various clauses, and this rule does not import the conditions of rule 3(1)(i). The Tribunal relied on previous decisions, including Hindalco Industries Ltd., Jaypee Sidhi Cement Plant, and Asahi Songwon Colors Limited, which supported the admissibility of such CENVAT credit. Thus, the Tribunal concluded that the credit was correctly availed. Issue 2: Applicability of Conditions in Rule 3(1)(i) to Rule 3(1)(vii) The Commissioner had mixed up the provisions of rule 3(1)(i) and rule 3(1)(vii), erroneously applying the conditions of rule 3(1)(i) to rule 3(1)(vii). The Tribunal clarified that Hindustan Zinc had paid additional duty of customs under the Customs Notification and not under the Central Excise Notification. Therefore, the conditions specified in rule 3(1)(i) did not apply to the credit availed under rule 3(1)(vii). Issue 3: Extended Period of Limitation The Tribunal found that the extended period of limitation under section 11A(4) of the Customs Act was not invokable. The Tribunal noted that the Department had applied the wrong provisions of law, which led to the erroneous denial of credit. Therefore, the extended period could not be justified. Issue 4: Imposition of Penalty and Interest Given that the credit was correctly availed and the extended period of limitation was not applicable, the Tribunal held that neither penalty could be imposed nor interest could be recovered. Conclusion: The Tribunal allowed the appeal filed by Hindustan Zinc, setting aside the order dated September 24, 2019, passed by the Commissioner. The Tribunal dismissed the appeal filed by the Commissioner against Ultratech Cement, upholding the order of the Commissioner (Appeals) which had allowed the CENVAT credit. The Tribunal found no error in the order passed by the Commissioner (Appeals) in the matter of Ultratech Cement and concluded that the credit availed was justified.
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