SESHASAYEE PAPER AND BOARDS LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants are manufacturers of paper and paper boards, for which they import some of the inputs on payment of Basic Customs Duty (BCD) and countervailing duty (CVD). The payment of these duties are made by way of debits in DEPB licence. During the period from Jan -Nov'05, they took CENVAT credit of Rs. 53,74,651/ - equal to the total amount of CVD and education cess debited in DEPB licence. The department objected to the availment; of credit on two grounds that viz. (a) credit could be availed only of an amount of duty paid in cash and (b) such availment was not permissible in the absence of a document specified under Rule 9(1) of the CENVAT Credit Rules, 2004 (CCR 2004, for short). The appellants contested this objection of the department on legal grounds. In adjudication of the dispute, ld. Commissioner ordered recovery of the above credit from the appellants under Rule 14 of the CCR 2004 read with Section 11A(2) of the Central Excise Act, along with interest under Rule 14 ibid read with Section 11AB of the Act, and imposed on them a penalty of Rs. 25 lakhs under Rule 15 of the CCR 2004 read with Rule 25 of the Central Excise Rules, 2002. Hence the present appeal.

(2.) AFTER hearing both sides and considering their submissions, we note that Notification No. 96/2004 -Cus. dated 17.9.2004, which granted concession for payment of BCD and CVD on specified goods subject to certain conditions, also provided that the importer would be entitled to avail drawback or CENVAT credit of CVD in the amount debited in DEPB. This benefit was expressly granted vide condition No. (vi) under the Notification. The DEPB licences used by the appellants were all issued after 17.9.2004 and, obviously, the subject imports were made subsequently. The imported goods were cleared on payment of duties of customs through debits in DEPB. The question to be considered is whether the importer was entitled to take CENVAT credit of the amount debited in DEPB towards payment of CVD. In the impugned order, ld. Commissioner held that such availment of credit was not permissible without the support of specific rules. He found that what was allowed under Rule 3(1) of the CCR 2004 was credit of duty "paid in cash". He held that, in the absence of payment of CVD in cash by the appellants, they were not entitled to CENVAT credit of the amount debited in DEPB. Ld. Commissioner further found no document specified under Rule 9(1) of the CCR 2004 evidencing payment of duty in this case. For this reason also, he held the credit to be inadmissible to the party. Ld. counsel has relied on the Board's Circular No. 59/2004 -Cus. dated 21.10.2004, wherein it was clarified in relation to DEPB scheme that, after the promulgation of Notification No. 96/2004 -Cus. ibid, the benefit of CENVAT credit of CVD paid through debit in DEPB on imported goods would be available to the importer. Ld. counsel has also referred to the Board's circular No. 27/2006 -Cus. dated 13.10.2006, wherein after consulting the Ministry of Law and Justice, the Board clarified that CENVAT credit of CVD paid on goods imported under Duty Free Credit Entitlement (DFCE) Scheme and Target Plus Scheme (TPS) could be availed by importers without amendment of the CENVAT Credit Rules. Ld. counsel has pointed out that, as in DEPB scheme, the above two schemes (DFCE and TPS) also permit payment of duties of customs on specified imported goods through debits in the relevant certificates. Quoting from the Board's circular dt. 13.10.2006, ld. counsel submits that the provisions for payment of CVD on imported goods by way of debits in DEPB and other similar licences/certificates are a matter of policy and legal administration rather than one of interpretation and, therefore, the benefit of such provisions could not be denied to importers on the grounds that there is no document prescribed for availment of such benefit under the CENVAT Credit Rules. Ld. counsel has also invited our attention to a Bill of Entry reproduced in the impugned order. It is submitted that all relevant particulars of debits in DEPB were available in this document, which is one of the prescribed documents under Rule 9(1) ibid. It is submitted that this aspect has not been properly examined by the Commissioner. It is, further, pointed out that the Tribunal's larger Bench in Essar Steel Ltd v. CCE, , relied on by the Commissioner to deny CENVAT credit to the appellants, is not applicable to imports made under Notification No. 96/2004 -Cus. dated 17.9.2004. In the said case, the question of admissibility of CENVAT credit had arisen in respect of imports made under Notification No. 34/97 -Cus. prior to the said date. It is submitted that ld. Commissioner erroneously considered the relevant conditions of Notification No. 96/2004 to be pari material with those of Notification No. 34/97. According to ld. counsel, in view of the Board's clarifications, which are binding on the Revenue, the appellants are entitled to the CENVAT credit in question. We have heard ld. SDR also, who has reiterated the findings of the adjudicating authority. His emphasis is on the texts of Rule 3(1) and Rule 9(1) of the CCR 2004. Upon strict interpretation of these rules, ld. SDR is of the view that the appellants are not entitled to CENVAT credit of CVD not paid in cash and, that too, without the requisite duty -paying documents.

(3.) AFTER giving careful consideration to the submissions, we have found substance in the plea of ld. counsel that the benefit of condition (vi) of Notification No. 96/04 -Cus. cannot be denied to the appellants in respect of the imports made after 17.9.2004 and cleared on payment of duties by way of debits in DEPB licences issued after the said date. One of the objections of the Revenue, reiterated by ld. SDR today, is that CVD was not paid in cash and hence CENVAT credit thereof was not admissible. This tantamounts to flouting condition (vi) of Notification No. 96/04 -Cus. as also Board's circulars in clarifications thereof. Hence we reject this objection. The second ground raised in the impugned order for denying the benefit to the appellants is that they were not possessed of any of the documents specified under Rule 9(1) for the purpose of availing the above credit. Ld. Commissioner has not accepted the relevant Bills of Entry for the said purpose. He has observed that debit entries made in DEPB have not been mentioned under Rule 9(1) and, therefore, the appellants cannot claim CENVAT credit of any amount debited in DEPB. It has been further observed that credit entries made in DEPB are mere imaginary credits which serve the purpose of checking misuse of the scheme statistically and that debits in DEPB are not duty payments. After careful scrutiny of the entries made in the Bill of Entry considered by the Commissioner, we find that this document contains all the requisite entries relating to debits made in DEPB towards payment of CVD on the imported goods, such as particulars of DEPB licences, particulars of registration thereof with the Customs authorities, value of the goods and quantum of debit. We find that these particulars were duly verified by the proper officer of Customs and certified by him. The credits in question are of the amounts of debits recorded in the Bills of Entry and certified by the proper officer. It is not in dispute that a Bill of Entry is one of the documents specified under Rule 9(1) of the CCR 2004 for the purpose of availment of CENVAT credit. We, therefore, hold that the appellants are entitled to CENVAT credit of the amounts debited in DEPB as certified in the Bills of Entry. The credit in question was taken on the strength of the Bills of Entry. There was no warrant for the adjudicating authority to hold that the credit was taken without the requisite document.