Custom, Excise & Service Tax Tribunal
Kalyani Steels Ltd vs Commissioner Of Central Tax And Central ... on 28 February, 2024
E/20303/2021
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 20303 of 2021
(Arising out of Order-in-Original No. BEL/EXCUS/000/
COM/SHD/003/2020-21 (CX) dated 17.3.2021 passed
by the Commissioner of CGST and Central Excise,
Belagavi.)
M/s. Kalyani Steels Limited
Hospet Road, Appellant(s)
Ginigera - 583 228.
Koppal District
Versus
The Commissioner of Central
Excise Respondent(s)
71, Club Road, Belgaum - 590 001.
Appearance:
Mr. M. S. Nagaraja, Advocate For the Appellant Mr. K. A. Jathin, AR For the Respondent CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 20122 /2023 Date of Hearing: 15.11.2023 Date of Decision: 28.02.2024 Per : DR. D.M. MISRA This is an appeal filed against Order-in-Original No. BEL/EXCUS/000/COM/SHD/003/2020-21 (CX) dated 17.3.2021 passed by the Commissioner of CGST and Central Excise Belagavi.Page 1 of 16
E/20303/2021
2. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of Pig Iron (Solid and Liquid) and Rolled Products Alloys/Non-Alloy falling under Chapter 72 of the Central Excise Tariff Act, 1985. During the relevant period from 2012-13 to 2014-15, they have availed total CENVAT credit of Rs.5,42,07,573/- on the Iron Ore received from various 100% Export Oriented Units (EOU) viz., M/s. Laxminarayana Mining Company, M/s. MSPL Limited, M/s. Deccan Mining Syndicate Pvt. Ltd., etc., and used in the manufacture of finished products. Alleging that the CENVAT credit availed on the duty component of Basic Customs Duty, Education Cess and Secondary Higher Education Cess of Rs.2,03,93,277/- paid on the iron ore by the 100% EOU as per Sl. No.4 of Notification No.23/2003 CE dt. 31.3.2003 being not admissible to the appellant, show-cause notice was issued on 14.3.2018 proposing recovery of the excess CENVAT credit of Rs.2,03,93,277/- availed during the said period along with interest and penalty. On adjudication, the demand was confirmed with interest and penalty and the duty paid has been appropriated. Hence, the present appeal.
3. At the outset, the learned advocate for the appellant has submitted that the suppliers who are 100% EOU units have cleared the Iron Ore in Domestic Tariff Area (DTA) on payment of Excise duty in terms of the proviso to Section 3(1) of the Central Excise Act, 1944 calculated in terms of Sl. No.4 of the Notification No.23/2003-CE dated 31.3.2003. The Iron Ore cleared by the Mining Lease Holders, including 100% EOUs, were sold through E-Auction conducted by the Monitoring Committee, Page 2 of 16 E/20303/2021 constituted by the Supreme Court, for regulating and conducting the mining and sale of Iron Ore. The Iron Ore cleared by the DTA units were exempt from payment of Excise Duty in terms of Notification No. 12/2012-CE dated 1.3.2012. However, the EOUs were required to pay appropriate Excise Duty in terms of proviso to Sectio 3(1) of the Central Excise Act, 1944, which is equal to the aggregate duties of customs calculated in terms of provisions of the Customs Act, 1962. He has submitted that Rule 3(7) of the CENVAT Credit Rules, 2004 prescribes quantum of CENVAT credit admissible in respect of inputs and capital goods cleared by an 100% EOU to a DTA unit. He has submitted that the learned Commissioner in the order has held that when provisions of Rule 3(7)(a) CENVAT Credit Rules, 2004 are not applicable to the facts of the present case, consequently Rule 3(1) of said Rules becomes applicable, where credit is allowed on the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985. The duty paid under proviso to Section 3(1) of the Central Excise Act, 1944 is an aggregate of the Basic Customs duty and Additional Customs duty, hence not covered under Rule 3(1) of CENVAT Credit Rules, 2004; Rule 3(1)(i) which governs availment of CENVAT credit read with proviso to Section 3(1) of the Central Excise Act, 1944 it is clear that an assessee is eligible to avail that portion of the Excise duty as specified in the First Schedule of CETA, 1985. Even though the Commissioner has accepted that there is no restriction in respect of Excise duty paid in terms of Sl. No.4 of the Notification No.23/2003-CE dated 31.03.2003, but confirmed the demand on the ground that the Page 3 of 16 E/20303/2021 appellant is eligible to avail only that portion of the Excise duty as specified in the First Schedule of Central Excise Tariff Act, 1985 and not the aggregate of Basic Customs duty (BCD) and Additional Customs duty paid under proviso to Section 3(1) of Central Excise Act, 1944. He has submitted that the excise invoices issued by 100% EOUs though reflects the amount of Excise duty, Education Cess (EC) and Secondary Higher Education Cess (SHEC) leviable and paid thereon, but the said invoices do not refer to BCD, EC & SHEC on BCD, Additional duty of customs, cess and SAD in terms of Customs Act, 1962. The appellant has availed CENVAT credit of the excise duty paid by the 100% EOU as shown in the excise invoices. He has further submitted that neither the CENVAT Credit Rules nor under the proviso to Section 3(1) of Central Excise Act, 1944 read with Sl. No.4 of the Notification No.23/2003-CE dated 31.03.2003, any restriction/condition or formulae for availing CENVAT credit has been prescribed. Thus, disallowing credit of Excise duty paid by 100% EOU considering it as if it a Customs duty, is contrary to the law and not sustainable.
4. To support of his contention, the duty paid by the 100% EOU is an Excise Duty and not Customs Duty, he has referred to judgment of the Hon'ble Supreme Court in the case of CCE & C vs. Suresh Syntehtic: 2017 (216) ELT 662 (SC). Further, the Larger Bench of the Tribunal in the case of Vikram Ispat vs. CCE: 2000 (120) ELT 800 (Tri.-LB), while examining the reference made with respect to admissibility of MODVAT credit of Excise duty paid on inputs in erstwhile Rule 57A of Central Excise Page 4 of 16 E/20303/2021 Rules held that the nature of duty levied on the goods by an 100% EOU is an Excise duty only even though for determining the quantum of duty, the measure adopted is the duties leviable under the Customs Act, 1962. Further, he has referred to the judgments of this Tribunal in the case of Molex (India) Pvt. Ltd. vs. CCE: 2016 (341) ELT 463 (Tri.-Bang.); Gopala Polyplast Ltd. vs. CCE & Service Tax, Ahmedabad: 2014- TIOL-1898-CESTAT-AHM and Jai Corporation Limited vs. CCE, Vapi: 2015 (317) ELT 489 (Tri.-Ahmd.).
5. The learned advocate further submitted that the show- cause notice issued on 14.3.2018 for recovery of the CENVAT credit availed during the period 2012-13 to 2014-15 is badly hit by limitation. He has submitted that the records of the appellant have been audited periodically by the Department for the entire disputed period and in support, he has referred to the final audit report No.122/2013 dated 17.6.2013 and 10.11.2016. Further, he has submitted that availing of CENVAT credit of the Excise duty paid by 100% EOU were recorded in their books of accounts and also periodical information reflected in monthly ER- 1 returns and no facts have been concealed or suppressed from the knowledge of the department. Further, it is submitted that the appellants have followed the decision of the Larger Bench of the Tribunal in the case of Vikram Ispat (supra) and Molex (India) Pvt. Ltd. (supra) on the issue of admissibility of credit, hence, invoking of extended period in confirming the demand is bad in law. To support his argument, he relied upon the following decisions:
Page 5 of 16
E/20303/2021 • CCE, Bangalore vs. Pragathi Concrete Products (P) Ltd.: 2015 (322) ELT 819 (SC) • Rajkumar Forge Ltd. vs. UOI: 2010 (262) ELT 155 (Bom.) • CCT vs. Zee Media Corporation Ltd.: 2018 (18) GSTL 32 (All.) • Monarch Catalyst Pvt. Ltd. vs. CCE, Thane: 2016 (41) STR 904 (Tri.-Mum.) • Trans Engineers India Pvt. Ltd. vs. CCE, Pune: 2015 (40) STR 490 (Tri.-Mum.)
6. The learned Authorised Representative for the Revenue reiterated the findings of the learned Commissioner. He has submitted that the appellant has discharged duty under Sl. No.4 of Notification No.23/2003-CE dated 31.3.2003. He has also submitted that admissibility of CENVAT Credit of the duty paid by a 100% EOU is covered by Rule 3(7) of CENVAT Credit Rules, 2004. He submits that under the said Rule, duty paid under Sl.
No.2, 3, 5, 6 and 7 of the Notification No.23/2003-CE dated 31.3.2003 is mentioned at Clause (A) and the extent of credit admissible has been laid down. In the present case, since the duty has been discharged under Sl. No.4 of the said Notification, therefore, the credit of duty paid by an 100% EOU cannot fall under Rule 3(7) of the CENVAT Credit Rules, 2004. The other Rule allowing CENVAT credit is the main Rule i.e., Rule 3(1) of CENVAT Credit Rules, 2004. Under the said Rule 3, at best Clause (vii) would be applicable. In the present case, since the additional duty of customs leviable under Section 3 on Customs Tariff Act equivalent to the duty of Excise is 'nil', therefore, the CENVAT credit availed by the appellant is irregular, hence, recoverable. Since the appellant has availed inadmissible credit, Page 6 of 16 E/20303/2021 therefore, the learned Commissioner has rightly confirmed the demand against the appellant.
7. Heard both sides and perused the records. The issues involved in the present appeal for determination are whether: (i) the appellants are eligible to avail the entire quantum of duty paid by an 100% EOU under the proviso to Section 3(1) of CEA,1944 read with Sl. No. 4 of Notification No.23/2003 CE dt.31.3.2003 on iron ore as credit under CENVAT Credit Rules, 2004 or the component of BCD and EC & SHEC considered in calculating duty under Notification No.23/2003CE dt.31.3.2003 be disallowed; and (ii) Whether the demand is barred by limitation.
8. The undisputed facts are that the appellant had availed total CENVAT credit of Rs.5,42,07,573/- i.e. the entire amount of duty paid by the supplier 100% EOUs of iron ore, computed as per Notification No.23/2003-CE dated 31.3.2003 (Sl. No.4) and shown on the respective input invoices. The Revenue's objection is that since Rule 3(7) of the CENVAT Credit Rules, 2004 restricting the duty paid by an 100% EOU is not applicable in the present case, their case would fall under Rule 3(i) of the CENVAT Credit Rules, 2004. It is further objected that under Clause (vii) of the said Rule 3(i) of CENVAT Credit Rules, 2004, the additional duty of customs, if any, paid be equivalent to the duty of excise specified under Clause (i) (ii) (iii) (iv) (v) (vi) and
(vi)(a) and in the present case, since the additional customs duty equivalent to countervailing duty (CVD) is nil, therefore the Page 7 of 16 E/20303/2021 appellants are not entitled to avail CENVAT credit on the portion of Basic Customs Duty, Education Cess and Secondary Higher Education Cess availed cannot be allowed. Consequently, differential CENVAT credit of Rs.2,03,93,277/- attributable to Basic Customs Duty (BCD) and Education Cess (EC) and Secondary Higher Education Cess (SHEC) on the applicable BCD has been denied to the Appellant and its recovery with interest and penalty confirmed against the appellant in the impugned Order.
9. It is not the case of the Department that the CENVAT credit availed by the appellant on the total duty-paid by the an 100% EOU as per Sl. No. (4) of Notification No.23/2003 dated 31.3.2003 be restricted as per rule 3(7) of CENVAT Credit Rules, 2004, but the duty-paid on the component of BCD, EC & SHEC referred to as part of the aggregate Customs duty payable under proviso to section 3(1) of Central Excise Act, 1944 in the Notification No.23/2003 dated 31.3.2003 is inadmissible as credit.
10. The argument of the learned advocate for the appellant, on the other hand, is that what an 100% EOU paid while clearing the iron ore is always an Excise duty, hence, credit is admissible to them on the duty-paid by an 100% EOU being an excise duty paid under Sl. No.4 of Notification No.23/2023-CE dated 1.3.2003 and the component of BCD, EC and SHEC is the measure of Excise duty, hence, credit on the same cannot be denied to them. In support, they have referred to the judgment Page 8 of 16 E/20303/2021 of the Hon'ble Supreme Court in the case of CCE vs. Suresh Synthetics (supra). Further, they have submitted that the duty paid by an 100% EOU has been considered as an Excise duty by the Larger Bench of the Tribunal in the case of Vikram Ispat vs. CCE, Mumbai (supra).
11. The duty payable by an 100% EOU as per Section 3(1) of Central Excise Act, 1944 is the aggregate duties of customs leviable under Customs Act, 1962. The said provision reads as follows:
"[SECTION 3. Duty specified in the Fourth Schedule to be levied. -- (1) There shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the Fourth Schedule:
Provided that the duty of excise which shall be levied and collected on any excisable goods which are produced or manufactured by a hundred per cent. export-oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value, the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 (51 of 1975)."
12. We find force in the contention of learned advocate for the appellant. The law is well settled by now that the duty paid by an 100% EOU is an Excise duty, though the measure adopted in computing the Excise duty is aggregate applicable duties of Customs, payable by a 100% EOU; it cannot be the criteria, in determining the nature of duty. The Larger Bench of the Tribunal Page 9 of 16 E/20303/2021 in Vikram Ispat 's case examined the controversy whether duty paid by an 100% EOU under proviso to Section 3(1) is an Excise duty or otherwise, observed as follows:
"12. We have considered the submissions of all the sides. The concept of 100% E.O.U. was brought with an idea to increase the export from the country. These units were provided facilities, among other things, of importing capital goods raw materials, components, etc. without payment of customs duty and also to obtain similar goods from domestic market without payment of central excise duty. These units have also been provided a facility to sell a specified quantity of their product in Domestic Tariff Area in India. In respect of excisable goods manufactured by them, Section 3(1) of the Central Excise Act provides that the duty of excise shall be an amount equal to the aggregate of the duties of customs on like goods produced or manufactured outside India, if imported into India. There is substance in the submissions of the learned Advocates for the appellants that the nature of the duty levied on the goods manufactured by 100% E.O.Us. is central excise duty whereas the measure of collection of duty is customs. The measure of collection of duty does not change the nature of duty. In support of their contention the learned Advocate has relied upon the decision in the case of D.G. Gouse & Co. Pvt. Ltd. v. State of Kerala supra, wherein it was held that a tax has two elements:
subject of a tax and the measure of a tax and decided cases establish a clear distinction between the subject matter of a tax and the standard by which the tax is measured. In this case a tax imposed by State Government on buildings on the basis of capital value of the Assets was held to be valid by the Supreme Court holding that for the purpose of levying tax under Entry No. 49, List II of the Seventh Schedule to the Constitution, the State Legislature may adopt annual or capital value of the building and this will not make it a tax falling within the scope of Entry 86 of List I of the Seventh Schedule. Similar views were held by the Supreme Court in the case of Hingir - Rampur Coal Co. Ltd. v. State of Orissa, AIR 1961 SC 459 wherein it was held that the method in which the fee is recovered is a matter of convenience and by itself it cannot fix upon the levy the character of the duty of excise. In this case a fee was levied by the State of Orissa on the basis of 5% of the value of the minerals at the pits mouth. It was challenged that the CESS was in the nature of duty of excise. The Supreme Court did not agree with this contention holding that "it is difficult to appreciate how the method adopted by the Legislature in recovering the impost can alter its character........ In our opinion, the mere fact that the levy imposed by the Page 10 of 16 E/20303/2021 impugned Act had adopted the method of determining the rate of levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. Again the Supreme Court in the case of U.O.I. v. Bombay Tyre International, supra, held that Section 3 of the Central Excise Act creates the charge and defines the nature of the charge that it is a levy on excisable goods, produced or manufactured in India. "The levy of tax is defined by its nature, while the measure of the tax may be assessed by its own standard". The Supreme Court held that "When enacting a measure to serve as standard assessing the levy the Legislature need not contour it along lines which spell out the character of the levy itself." In this case the Supreme Court did not accept the contention that because levy of excise is a levy on goods manufactured, the value of excisable goods must be limited to the manufacturing cost plus the manufacturing profit. We are, thus, in agreement with the learned Advocates that the duty which is levied on the goods manufactured and cleared by 100% E.O.Us to the Domestic Tariff Area is a duty of Excise and not a duty of Customs on account of a measure being the Customs duty provided in proviso to Section 3(1) of the Central Excise Act. (emphasis supplied)"
13. In the present case, the 100% EOUs are required to discharge Excise duty on the goods manufactured as per proviso to Section 3(1) of CEA, 1944. Consequently, they have discharged duty by availing the benefit of Notification No.23/2003-CE dated 31.3.2003 (Sl. No.4).
No. Chapter or Description Amount of Duty Cond-
heading No. of Goods itions
or sub-
heading No.
(1) (2) (3) (4) (5)
1 Any Chapter All goods Duty of excise leviable thereon as is equivalent to the 1
special additional duty of customs leviable on such goods under section 3A of the Customs Tariff Act, 1975 (51 of 1975) read with proviso to sub-section (1) of section 3 of the said Central Excise Act, 1944. Page 11 of 16
E/20303/2021 2 Any Chapter All goods In excess of the amount equal to fifty per cent. of the 2 duty leviable under section 3 of the Central Excise Act :
Provided that the duty payable in accordance with this notification in respect of the said goods shall not be less than the duty of excise leviable on the like goods produced or manufactured outside the export oriented undertaking, Electronic Hardware Technology Park unit or Software Technology Park unit, which is specified in the said Schedule read with the any other relevant notification issued under sub-section (1) of section 5A of the Central Excise Act :
Provided further that nothing contained in the first proviso shall apply to the goods which are chargeable to "Nil" rate of duty leviable under section 12 of the Customs Act, 1962 read with any other notification for the time being in force issued under sub-section (1) of section 25 of the said Customs Act.
Illustration.- Assuming product X has the value Rs. 100 under section 14 of the Customs Act, 1962 and is chargeable to basic custom duty of 25% ad valorem, additional duty of 16% ad valorem and special additional duty of 4% ad valorem. The computation of duty required to be paid would be as follows :
Basic Customs duty = Rs. 25/-
Value for the purpose of calculation of additional duty = Rs. 100/- + Rs. 25/- = Rs. 125/-
Additional duty = 16% of Rs. 125/-= Rs. 20/-
Value for the purpose of special additional duty if leviable = Rs. 100/- + Rs. 25/- + Rs. 20/- = Rs. 145/- special additional duty if leviable= 4% of Rs. 145/-= Rs. 5.8/-
Total duty payable but for this exemption= Rs. 25/-+ Rs. 20/- + Rs. 5.80/-= Rs. 50.80/-
50% of aggregates of the duties of customs= 50% of Rs. 50.80/-= 25.40/-
Duty required to be paid in accordance with this notification is Rs. 25.40/- provided it is not less than the duty of excise leviable on like goods produced or manufactured outside the oriented undertaking, etc. 3 Any Chapter All goods In excess of amount equal to aggregate of duties of 3 other than excise leviable under Section 3 of the Central Excise Act those or under any other law for the time being in force on like referred to in goods produced or manufactured in India other than in Sr. Nos. 5, 6 an export oriented undertaking, if sold in India. and 7 of this Table.
4. Any Chapter All goods In excess of amount equal to 30% of the duty payable 4 produced or under section 3 of the Central Excise Act, 1944. manufactured wholly from Illustration.- Assuming product X has the value Rs. 100 the raw under section 14 of the Customs Act,1962 and is materials chargeable to basic custom duty of 25% ad valorem, produced or special additional duty of 4% ad valorem and not manufactured chargeable to additional duty. The computation of duty in India, required to be paid would be as follows :
other than
those Basic Customs duty = Rs. 25/-
referred to in
Sr. Nos. 5, 6 Value for the purpose of special additional duty if
and 7 of this leviable = Rs. 100/- + Rs. 25/- = Rs. 125/-
Table.
special additional duty if leviable= 4% of Rs. 125/-= Rs. 5.0/-
Total duty payable but for this exemption= Rs. 25/-+ Rs. 5.00/-= Rs. 30.00/-
Thirty per cent. of the aggregates of the duties of customs= 30% of Rs. 30.00/-= 9.00/-
Duty required to be paid in accordance with this notification = Rs. 9.00/-
Page 12 of 16
E/20303/2021
5 52 Cotton fabric In excess of amount equal to fifty per cent. of the 5
(not aggregate duty, not reduced by any other notification for
containing the time being in force :
any other
textile Provided that the fifty per cent. of the aggregate duty
material), not leviable on the goods shall be apportioned in the ratio subjected to 2:1 between the duty leviable under the said Central any process, Excise Tariff Act and the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957). Explanation.- For removal of doubt, it is clarified that the value of the goods shall be determined in terms of the section 4 of the Central Excise Act.
6 52, 54 or 55 Fabrics of - In excess of amount equal to fifty per cent. of the 5 aggregate duty, not reduced by any other notification :
(i) cotton Provided that the fifty per cent. of the aggregate duty (containing leviable on the goods shall be apportioned in the ratio any other 2:1 between the duty leviable under the Central Excise textile Tariff Act, 1985 (5 of 1986) and the Additional Duties of material), Excise (Goods of Special Importance) Act, 1957 (58 of 1957).
(ii) man-
made fibres, Explanation.- For removal of doubts, it is clarified that
- not the value of the goods shall be determined in terms of
subjected to the section 4 of the Central Excise Act.
any process
7 60 (i) Knitted In excess of amount equal to fifty per cent. of the 5
or crocheted aggregate duty, not reduced by any other notification:
fabrics of
cotton, Provided that the fifty per cent. of the aggregate duty
whether or leviable on the goods shall be apportioned in the ratio
not 2:1 between the duty leviable under the said Central
processed; Excise Tariff Act and the said Additional Duties of
Excise (Goods of Special Importance) Act.
(ii) Knitted Explanation. - For removal of doubts, it is clarified that or crocheted the value of the goods shall be determined in terms of fabrics of the section 4 of the Central Excise Act.
man-made fibres, not subjected to any process,
14. A plain reading of the said Sl. No.4, it is clear that the circumstances and corresponding method of computation of duty and quantum required to be paid by an 100% EOU in DTA is different from the duty payable against Sl. No. 2 of the said Notification. Therefore, no doubt the duty paid by an 100% EOU be considered as Excise duty in view of the principle of law settled by the Larger Bench in Vikram Ispat's case (supra) and Hon'ble Supreme Court in the case of Suresh Synthetic's case(supra), however, in allowing the proportion of CENVAT credit of the duty paid by an 100% EOU is prescribed at sub-rule (7) of Rule 3 of CENVAT Credit Rules, 2004 which is in line with the observations of the Larger Bench of the Tribunal in Vikram Ispat's case.
Page 13 of 16
E/20303/2021 "17. The question then arises is how to determine the quantum of Modvat credit available to the manufacturer in respect of the goods procured from a 100% E.O.U. The only method, which, we feel, is available to the Revenue is as suggested by the learned Counsel, i.e. ascertain firstly the additional duty of customs leviable on like goods, if imported into India from outside India; ascertain the actual amount of duty paid by the 100% E.O.U. on the goods cleared to any part in India under Notification No. 2/95; after ascertaining these two elements the Modvat credit has to be allowed to the manufacturer on the basis of the first proviso to notification No. 5/94-C.E. As per first proviso to this notification credit shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods. If the additional duty is less than the actual duty paid on the inputs cleared from 100% E.O.U., the manufacturer in India shall be eligible only for the credit equivalent to the additional customs duty. On the other hand if the duty actually paid by 100% E.O.U. on inputs cleared by them is less than the additional duty of customs payable on like goods the manufacturer shall be eligible only to the extent of actual duty paid by 100% E.O.U. The reading of first proviso to notification No. 5/94 does not indicate at all that the credit of specified duty shall be restricted to the components of additional customs duty actually paid by 100% E.O.U. as excise duty. Had this been the intention of the Government, the proviso would not have been termed in the present form. In that situation the proviso should have provided that the credit of specified duty shall be restricted to the extent of portion of excise duty which is equivalent to the additional duty of customs paid by the 100% E.O.U. The phrase "equivalent to the duties of excise specified under (i) & (ii) above paid on such inputs" refers to the payment of (a) duty of excise under the Central Excise Act and (b) additional duty of excise under the Additional Duties of Excise (Textiles and Textile Articles) Act. If the Additional Customs duty leviable on like goods includes any other excise duty, such as duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Modvat Credit will not be available in respect of such duty."
15. In the instant case, the department has adopted a wrong basis in denying a portion of the CENVAT credit to the appellant of the duty paid by 100% EOUs, on the ground that component of BCD and applicable EC & SHEC on the BCD adopted in computing aggregate duties of Customs, which is nothing but Excise duty being not mentioned in Rule 3(1) of CCR, 2004, hence, not admissible. The said reasoning adopted by the Learned Commissioner in denying a portion of the duty as CENVAT credit cannot be sustained being contrary to the Page 14 of 16 E/20303/2021 principle of law laid down in Vikram Ispat's case (supra). We find a somewhat similar view has been expressed in the judgment of Gopala Polyplast Ltd.'s case (supra) cited by the learned advocate.
16. On the issue of limitation, we find that the appellants have been availing CENVAT credit of the duty paid on iron ore by the 100% EOUs and filing ER-1 returns periodically with the department. In the present case, the demand was issued for invoking extended period on 14.3.2018 alleging excess CENVAT credit availed during the period 2012-13 to 2014-15. The learned advocate for the appellant has vehemently argued that on the basis of the judgment of the Larger Bench in the case of Vikram Ispat vs. CCE, Mumbai (supra) they have been availing CENVAT credit of the Excise duty paid by the 100% EOU. Also, it is argued that the CENVAT credit records have been subjected to audit by the department during the said period twice i.e., on 17.6.2013 and 10.11.2016. Besides, they have been disclosing the CENVAT credit availed by them in their monthly ER-1 returns, therefore, allegation of suppression of facts with intend to evade payment of duty is unsustainable.
17. We do not find any material evidence discussed in the impugned order which would support suppression of facts on the part of the appellant. From the records of the case, on the contrary, it is clear that the appellants have been availing CENVAT credit on the duty paid by 100% EOU after duly Page 15 of 16 E/20303/2021 reflecting the same in the relevant monthly ER-1 returns filed with the department periodically and the present demand relates to a portion of CENVAT credit held to be inadmissible. Thus, we do not see merit in the allegation of the department that the appellant had suppressed availing of excess amount of CENVAT credit against the duty paid by 100% EOUs reflected in the invoices with an intend to evade payment of duty. Accordingly, the demand confirmed invoking extended period of limitation cannot be sustained. Consequently, the penalty imposed also cannot be sustained.
18. In the result, the impugned order is set aside and the appeal is allowed, with consequential relief, as per law.
(Order pronounced in Open Court on 28.02.2024) (D.M. MISRA) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 16 of 16