Custom, Excise & Service Tax Tribunal
M/S. Tecumseh Products India Pvt. Ltd vs Cce, Hyderabad (Vice Versa) on 21 January, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 21/01/2010
Date of decision:21/01/2010
Appeal No.E/154, 279/08
(Arising out of Order-in-original No.17/2007-C.Ex. dt. 19/12/2007 passed by CC&CE, Hyderabad )
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Tecumseh Products India Pvt. Ltd.
..Appellant(s)
Vs.
CCE, Hyderabad (vice versa)
..Respondent(s)
Appearance Mr.G.Shivadass, Advocate for the assessee.
Mr.M.Ravi Rajendran, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran These two appeals are filed against the Order-in-Original No.17/2007-C.Ex. dt. 19/12/2007. Appeal No.E/154/08 is filed by the assessee and while appeal No.E/279/08 is filed by the Revenue against the very same Order-in-Original. Since both the appeals are directed against the very same Order-in-Original, we take up these appeals together for disposal, by a common order.
2. The relevant facts that arise for consideration are that the appellant/assesee had availed/taken cenvat credit on Special Additional Duty (SAD) paid on imported inputs/capital goods, debited the amount of duty to the extent in various licenses obtained by them under DFCE/DEPB and Target Plus schemes. It was the contention of the Revenue in the show cause notice that the appellant should have paid the amount of SAD by cash and could have availed the credit of the duty if the amount has been paid in cash and mere debit in the licences obtained by them cannot be eligible for availment of cenvat credit. Coming to such conclusion, show cause notice dt. 05/7/2007 was issued directing them show cause as to why the amount of credit availed by them should not be recovered and penalty & interest be not demanded from them. Appellant contested the show cause notice on various grounds, mainly on the ground that the notification under which the amount was paid was accepted and admitted by the customs authorities and the lower authorities cannot question the said debit and also on the ground that the provisions of the notification were very clear as to eligibility to availment of the SAD leviable under Section 3 of the Customs Tariff Act. The adjudicating authority after considering the written and oral submissions made by the appellant concluded that the appellants do not have a case and coming to such conclusion, he confirmed the demand and directed them to pay interest. He did not impose any penalty. Aggrieved by such an order, the appellant is before us.
3. In the Revenues appeal, Revenue is aggrieved by the Order-in-Original on the non-imposition of penalty by the adjudicating authority on the appellant despite holding that the appellant had availed ineligible cenvat credit.
4.1. Ld. Counsel appearing on behalf of the assessee submits as under:-
I. EXCISE AUTHORITIES HAVING JURISDICTION OVER THE APPELLANTS FACTORY CANNOT QUESTION THE ACCEPTANCE OF PAYMENT OF SAD THROUGH DEBIT IN DFCE SCRIP a. There is no dispute about the fact that the Appellants have paid 4% SAD by debiting the credit earned in the various schemes in question.
b. The respective Bills of Entry have been assessed by the concerned customs authorities and only thereafter the imported goods were cleared out of Customs charge. In other words the payment of SAD through debiting the credits earned has been accepted by the customs officer assessing the goods at the port.
c. The Appellants submit that till date neither there has been a Show Cause Notice issued to the Appellants by the Customs authorities alleging short-payment of duty due to debit in DFCE scrip nor the Bill of Entry on which the goods were imported has been challenged by the department by way of filing of an appeal. Consequently, the assessments in the respective bills of entry have attained finality.
d. The Appellants submit that Rule 3 of the Cenvat Credit Rules specifically permits the availment of credit of the Additional duties leviable under section 3(5) of the Customs Tariff Act, 1975 and they have consequently correctly availed the Cenvat Credit of the Special Additional Duty (SAD) paid under Section 3 (5) of the Customs Tariff Act, 1975.
e. The Board has also clarified vide Circular dated 13.10.2006 that additional duty leviable under Section 3 of the Customs Tariff Act, 1975 paid in cash or through debit under DFCE (which was replaced by Target Plus Scheme) would be adjusted as Cenvat Credit or duty drawback.
f. The Board, in the above Circular, specifically noted that no further amendment in Rule 3 of the Cenvat Credit Rules, 2004 was required as it provided for availment of credit of additional duty paid under Section 3 of the Customs Tariff Act, 1975 which would evidently cover every kind of additional duty levied under Section 3 ibid.
g. In this regard the Appellants rely on the decision of the Tribunal in the case of Seshasayee Paper and Boards Ltd. Vs CCE., Salem reported in 2007 (217) EL. T. 562 (Tri - Chennai) wherein it was held that credit of CVD paid by debiting in the DEPB scrip cannot be denied on ground that duty was not paid in cash as it would amount to flouting of condition (vi) of Notification No. 96/04-Cus. Further, it was observed that in pursuant to the CBEC circulars customs duty debited in DEPB scrip is a duty paid for purpose of Cenvat Credit Rules, 2004.
h. The above decision has again been followed by the Tribunal in the case of Seshasayee Paper and Boards Lt. Vs CCE, Salem reported in 2008 (223) E.L. 7. 616 (Tri - Chennai) i. In view of the above, the appellants submit that they are entitled to avail credit of SAD, paid by adjusting against the licenses.
j. Without prejudice to the above, the Appellants submit that the excise authorities having control over their factory have no power to question the correctness of payment of SAD by way of debit in DFCE scrip if the Customs authorities have not questioned the said manner of payment. All that the jurisdictional authorities in charge of the appellants can do is to question either the correctness of the credit availed or the manner of utilization of such credit.
k. The appellants in this regard, rely on the following decisions:
1. CCE Vs. MDHSwitchgear Ltd -2008 (229) ELT 485 (SC)
2. CCE Vs Raison India Ltd. -2006 (202) ELT 759 (P&H)
3. CCE Vs. M.P. Telelinks Ltd. - 2004 (178) EL T 167 (Tn-Del) II. NOTIFICATION PERMITS PAYMENT OF SAD BY DEBITING THE DFCE SCRIPS a. The Appellants submit that Foreign Trade Policy 2004-2009 provide that the additional customs duty/excise duty paid in cash or through debit in DFCE/Target Plus shall be adjusted as Cenvat credit or duty drawback as per rules framed by the Department of Revenue. Such a benefit was under the erstwhile EXIM Policy, 2002-07.
b. For ease of reference relevant paras from both the Policies are extracted below.
Para 4.3.5 of the Export Import Policy 2002-07 (as on 1.4.2004) Normally, the exports made under the DEPB Scheme shall not be entitled for drawback. However, the additional customs duty/ excise paid in cash on inputs under the DEPB shall be adjusted as Cenvat credit or duty drawback as per rules framed by Department of Revenue.
Para 4.3.5 of the Foreign Trade Policy, 2004-09 Normally, the exports made under the DEPB Scheme shall not be entitled for drawback However, the additional customs duty/excise paid in cash or through debit under DEPB shall be adjusted as Cenvat credit or duty drawback as per rules framed by Department of Revenue.
c. On a comparison of the Export Import Policy, 2002-07 and the Foreign Trade Policy, 2004-09, it would thus be seen that there is a fundamental change in the Policy with regard to the adjustment of duty paid through DEPB/DFCE/Target Plus.
d. In the case of DEPB and Target Plus Scheme, the Notifications as enacted contained the facility of payment of additional duty through debit of the credit earned.
e. In the case of DFCE, Notification No. 53/2003-C us dated 1.04.2003 as issued granted exemption to inputs imported under duty free entitlement credit certificate (DFCE) from payment of Basic Customs Duty and Additional Duty if the duty is debited from the Cenvat earned. It did not have any mention of the entitlement of the importer to avail drawback or Cenvat Credit of the additional duty leviable under section 3 of the Customs Tariff Act, 1975.
f. Notification No.53/2003 Cus dated 1.4.2003 was amended by Notification No. 97/2005 Cus dated 17.11.2005 by which a provision was made to facilitate the availment of credit of duty paid through debiting the DFCE certificate vide Condition No.7.
The relevant portion of the Notification is as follows:
7) That the importer shall be entitled to avail of the drawback or CENVAT credit of additional duty leviable under Section 3 of the said Customs Tariff Act against the amount debited in the said certificate g. In spite of the above amendment, till 2006, the opening paragraph of the above notification referred to additional duty leviable under Section 30) of the Customs Tariff Act, 1975.
h. By an amendment brought about vide Notification No. 117/2006-Customs Act, 1962 dated 1 9.12.2006 exemption from payment of all the additional duties leviable under Section 3 of the Customs Tariff Act, 1975 was granted.
i. The Cenvat credit Rules, 2004 as amended however permitted the availment of credit of duty paid under Section 3 of the Customs Tariff Act without prescribing the mode of payment as a qualification.
4.2. It is his submission that the benefit of notification cannot be challenged at the lower end as the said notification clearly allowed the credit on the duty paid under Section 3 of the Customs Tariff Act.
5. Ld. DR on the other hand would submit that the payment of SAD by the appellant by debit through DFCE/DEPB licence is not eligible as a cenvat credit. He would rely upon the Boards circular No.20/2006-Cus dt. 21/7/2006 (relied upon by the adjudicating authority in the Order-in-Original) to submit that only CVD is allowed to be debited on the DFCE scheme and not SAD. As regard Notification No.54/2003-Cus. as amended, it is his submission that the said Notification clearly indicate that the SAD leviable under sub-section (1) of Section 3 of the Customs Tariff Act is only allowed to be debited under DFCE scheme. He would reiterate the findings of the adjudicating authority.
6. We have considered the submissions made by both sides and perused the records. The issue involved in this case is regarding the eligibility to avail Cenvat credit of the amount of SAD paid as debit in DFCE licence. It is undisputed that as per Rule 3 of the Cenvat Credit Rules, any duty paid under Section 3 of the Customs Tariff Act is eligible to an assessee as Cenvat credit. This point is not contested. It is also undisputed that the appellant in this case has paid the SAD by a debit in the DFCE licence and there was enough credit in the said licence issued under DFCE scheme, for debit the SAD leviable on the goods. The adjudicating authoritys findings for denying the cenvat credit is as under:-
11. The assessee has imported goods under Notification No.53/2003-Cus. dt. 1/4/2003 and the SAD payable has been debited against the DFCE certificates. In view of the clarification given as above, the special CVD or SAD at the rate of 4% could not be debited against the DFCE scrips. They were required to pay the special CVD/SAD in cash and thereafter, were entitled for Cenvat credit. Inasmuch as, the assessee has not paid SAD in cash on the imported goods, they are not entitled to take Cenvat credit. It can be seen from the above reproduced portion of the Order-in-Original that the adjudicating authority has come to the conclusion that the appellant could not have debited the SAD under DFCE licence as per the Boards circular dt. 21/7/2006. It is undisputed in this case that the goods were imported and the amounts were debited in the licence during the period June, 2006 to March, 2007 and till today the Customs authorities have not issued any show cause notice nor there is any direction from the authorities to the appellant that they have to pay such amount in cash. In the absence of any such direction from the Customs authorities, it does not lie in the hand of the Central Excise authorities to hold that the appellant could not have debited the amount under notification. Any liability of short payment of Customs duty by debiting the DFCE licence, the demand should have to be raised by the appropriate authorities. Having not done so, it has to be held that the appellant has paid the 4% SAD. If the appellant has paid the 4% SAD as leviable under Section 3 of the Customs Tariff Act, the eligibility to avail credit is allowed by Cenvat Credit Rules and also under the relevant notifications. Relevant notification No.53/2003-Cus. dt. 01/04/2003 clearly indicates that the assessee is eligible to avail cenvat credit of the duty paid under Section 3 of the Customs Tariff Act and identical words are there in Cenvat Credit Rules.
7. In view of the foregoing reasonings, we are of the considered view that the impugned order denying the cenvat credit to the appellant is incorrect and is liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed with consequential relief, if any. As the impugned order is set aside on merits itself, the question of imposition of penalty does not arise at all, as is prayed in the appeal filed by Revenue. In sum, the appeal of the assessee is allowed and the appeal of the Revenue is rejected.
(Operative portion of this order pronounced on conclusion of the hearing) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 11