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TMI Blog2025 (3) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough: Mr. Akshay Amritanshu, Sr. SC, CBIC with Ms. Drishti Saraf and Ms. Pragya Upadhyay, Advs. (M: 9931282222) JUDGMENT PRATHIBA M. SINGH, J. 1. The present petition has been filed by the Petitioner under Article 226 of the Constitution of India, inter alia, challenging the impugned Final Order No. F-3479/CUS/2019-SC(PB) dated 23rd January, 2019 passed by the Customs, Central Excise & Service Tax Settlement Commission, Principal Bench, New Delhi (hereinafter "the Settlement Commission") under Section 127C (5) of the Customs Act, 1962 (hereinafter "the Act"). 2. Vide the impugned Final Order, the Settlement Commission, inter alia¸ has rejected the claim of the Petitioner for CENVAT Credit of the 'countervailing duty' (hereinafter "CVD") paid on the imported capital goods. I. Factual Background 3. The Petitioner is a company engaged in manufacturing and sale of craft paper. It was established in the year 2000 and started manufacturing activities in the year 2002. Until 2014-15, the Petitioner was engaged in manufacturing of writing and printing paper as also news print. However, thereafter it started manufacturing craft paper. In respect of the said manufacturing, certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 6. After the show cause notice was issued, the Petitioner approached the Settlement Commission by way of an application under Section 127B of the Act to have the case settled. In the said application, the Petitioner admitted and accepted that the duty payable for settlement is Rs. 31,71,143/- and interest is to the tune of Rs. 50,29,597/-. The Petitioner, in addition to praying for adjustment of the differential duty, also sought to avail the CENVAT Credit in respect of the CVD paid on the imported goods. The prayer in the said settlement application was as under: "1. That the amount of Rs. 82,01,100/- (31,71,143/- as duty + 50,29,957/- as interest) paid by the Applicant may be accepted as the full and final payment of duty and interest thereon. 2. Applicant may be allowed to avail CENVAT Credit of Rs. 23,18,633/- paid towards CVD against the import of capital goods. 3. That the proposal for confiscation of imported goods under sections 111 (o) of Customs Act may be dropped. 4. That the penal proceedings initiated under sections 112 (a) and 112 (b) of the Customs Act may be dropped. 5. That immunity from prosecution for offences, if any, committed under the Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner, CENVAT Credit cannot be refused to the Petitioner. He further relies upon the decision of the Central Excise & Service Tax Appellate Tribunal, Mumbai (hereinafter "CESTAT, Mumbai") in Philips India Ltd. vs. Commissioner of Central Excise, Vadodara, 2005 (191) E.L.T. 1028 (Tri. - Mumbai) wherein under similar circumstances, the CENVAT Credit of the CVD was allowed. It is submitted by the ld. Counsel that the said decision of the CESTAT, Mumbai has been upheld by the Gujarat High Court in Commissioner of C. Ex. & Customs v. Philips India Ltd., 2006 SCC OnLine Guj 460. 11. Reliance is also placed upon a Circular No. 199/33/96-CX dated 23rd April, 1996 issued by the Central Board of Excise & Customs (hereinafter "CBIC") as per which, it is clarified that the time limit of six months for claiming credit under the second proviso of Rule 57-G of the Central Excise Rules, 1944 would not apply to the availing of credit on capital goods under Rule 57T of the Central Excise Rules, 1944. 12. On the other hand, Mr. Akshay Amritanshu, ld. Senior Standing Council appearing for the CBIC submits that the Petitioner is not eligible to avail the CENVAT Credit for CVD as the differential c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules which deals with the conditions for allowing of CENVAT Credit read as under: "RULE 4. Conditions for allowing CENVAT credit. - (1) [...] Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after one year of the date of issue of any of the documents specified in sub-rule (1) of rule 9. (2)(a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service or outside the factory of the manufacturer of final products for generation of electricity for captive use within the factory or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be, at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year: PROVIDED that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in such financial year; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relevant portions of the said judgment are extracted herein below: "6. At the outset, we must note that none of the appellants has challenged d the validity of the said proviso, therefore, we will have to proceed on the basis that the proviso in question is a valid one. In that background, the sole question that we will have to consider will be: whether the proviso to the Rule in question is applicable to the cases of manufacturers who had received their inputs prior to the introduction of the said proviso and are seeking to take credit in regard to the said inputs beyond the period of six months. 7. Having heard the arguments of the parties and after considering the Rule in question, we think that by introducing the limitation in the said proviso to the Rule, the statute has not taken away any of the vested rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer's vested right is taken away, therefore, the Rule in question should be interpreted in such a manner that it did not apply to cases where the credit in question had accrued prior to the date of introduction of this proviso. In our opinion, this argument is not available to the appellants because none has questioned the legality or the validity of the Rule in question, therefore, any argument which in effect questions the validity of the Rule, cannot be permitted to be raised. The argument of the appellants that there was no time whatsoever given to some of the manufacturers to avail the credit after the introduction of the Rule also is based on arbitrariness of the Rule, and the same also will have to be rejected on the ground that there is no challenge to the validity of the Rule. 9. Without such a challenge, the appellants want us to interpret the Rule to mean that the Rule in question is not applicable in regard to credits acquired by a manufacturer prior to the coming into force of the Rule. This we find difficult because in our opinion the language of the proviso concerned is unambiguous. It specifically states that a manufacturer cannot take credit after six m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-4-1996 clarifies that time limit of six months prescribed in 2nd proviso to Rule 57G will not apply to availment of credit on capital goods under Rule 57-I and these instructions have been issued by the Board in consultation with the Ministry of Law. The Tribunal in the case of Surya Prabha Mills Limited v. Commissioner of Central Excise, Coimbatore reported in 2002 (149) E.L.T. 929 has held that no restriction in time limit, fixed for taking credit in respect of capital goods could be found by them. The reliance of the Commissioner upon the decision of the Hon'ble Tribunal in the case of MRF Ltd. v. CCE, Madras reported in 1996 (88) E.L.T. 222 and associated Flexible & Wires Pvt. Ltd. v. Commissioner of Central Excise and Customs, Pune reported in 1995 (78) E.L.T. 292 is misplaced since these decisions appear to relate to credit on inputs and not on capital goods, as is the case herein. The decision in the case of Surya Prabha Mills Ltd. v. CCE, Coimbatore (supra) was therefore required to be followed by the Commissioner. The Commissioner's findings in this regard are therefore to be set aside. [...] (k) The appellants have pleaded that the impugned order traverse be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Rule 57G of the 1944 Rules. The High Court relied on the decision of the Supreme Court in Osram Surya (supra) and the six months period for availing of credit under Rule 57G was held to be applicable and accordingly the credit was refused. 27. In Global Ceramics Pvt. Ltd. (supra) a Co-ordinate Bench of this Court was considering a case where certain ceramic tiles had been imported and due to the products being sold higher than the MRP, a show cause notice was issued demanding differential duty and penalty. At the time of the import, the company had paid the basic customs duty, the CVD and Education Cess. The company preferred an application before the Settlement Commission and at that stage, the company admitted duty liability along with interest. The company also sought adjustment of CVD paid at the time of import and CENVAT Credit paid as service tax. The Settlement Commission remanded the issue relating to CENVAT Credit to the Jurisdictional Commissioner. This was challenged by the company before this Court. The Court followed the earlier decision in the case of same company wherein the Settlement Commission had taken a contrary view and held that a substantive right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant concerned had imported certain goods from South Korea and declared an assessable value. The Department found that the said goods were undervalued, and the show cause notice was served demanding additional customs duty. At that stage, the Petitioner approached the Settlement Commission. The Commission imposed the duty liability and granted immunity from prosecution and penalty. After paying the duty, the Petitioner claimed the amount as CENVAT Credit. The Department took the position that no credit is available when there was wilful misstatement of facts under Rule 9 (1) (b) of the Rules. The CENVAT Credit was finally disallowed by the adjudicating authority and interest was also imposed. The appeals before Commissioner and the CESTAT were dismissed and the order of the Adjudicating Authority was upheld. The Appellant therein appealed before the Madras High Court which in these facts observed as under: "16. The provision of Chapter XIVA of the Customs Act, 1962, providing for settlement of disputes by the Settlement Commission is an independent Code and while it is provided to enact a remedial forum for putting an end to disputes in a quicker and more peaceful manner, it gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding the Central Excise Act and the Cenvat Credit Rules. Therefore, we do not find any merit in the said contention of the Assessee and the same is liable to be rejected, which is, accordingly, rejected. 19. The case of the Revenue that even Rule 9 (1) (b) of the Cenvat Credit Rules, 2004, prohibits the credit of excise duty or customs duty in case the same has been paid and recovered from the Assessee on account of earlier non-levy or short-levy, by reason of fraud, collusion, wilful misstatement or suppression of facts, also has considerable force. 20. The contents of the Show Cause Notice in the present case, would clearly reveal that the case of the Revenue against the Assessee in the said Show Cause Notice was that of misstatement of facts and suppression of facts as well as misrepresentation of the assessable value of the goods to the extent of Rs. 49,02,861/-, which was declared only at Rs. 13,93,827/-. Merely because the said Show Cause Notice did not result in any Final Order at the instance of the Assessee itself, it does not mean that there was no case of fraud or misrepresentation or wrong declaration on the part of the Assessee. Therefore, even on the applicabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. The relevant paragraph of the order is set out below: "Fine: As the goods in respect of past imports to which confiscation has been proposed in the SCN, are not available for confiscation, the Bench refrains from ordering confiscation of the same or imposing any fine in lieu of confiscation in accordance with law." 32. Further, it is noted that the Settlement Commission has clearly observed that had the investigation not been initiated the fraud on part of the Petitioner would never have been detected. Accordingly, the Settlement Commission has found the Petitioner liable for penal action under the provisions of the Act in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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