TMI Blog2020 (10) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 Notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 passed by the Joint Commissioner disallowing CENVAT credit of ₹ 1,83,23,753/- with interest and penalty has been set aside and the appeal has been allowed. In this appeal the respondent is M/s Ultratech Cement Limited, Chittorgarh, Ultratech Cement. 3. Hindustan Zinc is engaged in the manufacture of zinc and lead concentrates falling under Chapter 26 of the First Schedule to the Central Excise Tariff Act, 1985, the Excise Tariff Act and has been availing the facility of CENVAT credit on inputs, capital goods and input services under the CENVAT Credit Rules, 2004, the CENVAT Credit Rules. For manufacturing the final products, Hindustan Zinc consumed power generated from its captive thermal plant wherein steam coal / steam non-coking coal falling under Chapter Heading 27.01 of the Customs Tariff Act, 1975, the Customs Tariff Act is used as input. During the relevant period, Hindustan Zinc paid additional duty of customs in terms of section 3(1) of the Customs Tariff Act on the importation of steam coal. It is stated that for payment of such additional duty of customs, the benefit under serial number 122 A/123 (serial number 121B w.e.f March 1, 2006) of the Customs No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated October 27, 2017 was issued, proposing to disallow the CENVAT credit amounting to ₹ 1,83,23,753/- for the reason that CENVAT credit of duty specified in the First Schedule to the Excise Tariff Act is admissible under rule 3 of the CENVAT Credit Rules and so additional duty of customs equal to duty of excise leviable under the Excise Tariff Act read with any other notification is only admissible for CENVAT credit. 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 had wrongly been availed by the Ultratech. Further, the benefit of concessional rate of excise duty under the Notification dated March, 2017 was available in respect of coal subject to the condition that no credit was availed under the CENVAT Credit Rules. The extended period of limitation was also invoked. The reply filed by Ultratech Cement did not convince the Joint Commissioner and so the demand made in the show cause notice was confirmed in its entirety. Ultratech Cement filed an appeal before the Commissioner (Appeals) who by order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Representative of the Department has made the following submissions:- (i) The CENVAT credit on duty paid on Coal is allowed to be taken in respect of duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under Excise Act. Though the additional duty of customs cannot be treated as duty of excise per se, but as per clause (vii) of sub-rule (1) of rule 3 of CENVAT Credit Rules, the CENVAT credit of the additional duty leviable under section 3(1) of the Customs Tariff Act is allowed equivalent to the duty of excise specified in clause (i) to (via) of sub-rule (1) of rule 3 of CENVAT Credit Rules; (ii) It is, therefore, clear that the eligibility of credit of additional duty of customs under rule 3(1)(vii) is not determined with reference to the additional duty paid under the Notification dated March 17, 2012, but is determined only with reference to the excise duty specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via) of rule 3 (1); (iii) If clauses (i) and (vii) of sub-rule (1) of rule 3 of CENVAT Credit Rules are read harmoniously and conjointly, it is clear CENVAT credit in respect of additional duty of customs is allowed equal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the conditions laid in Rule 3 of the Cenvat Credit Rules, 2004. The rule 3(1)(i) of Cenvat Credit Rules, 2004 speaks that the Cenvat Credit of duty of excise as specified in the first schedule to the Central Excise Tariff Act, 1985 read with any Notification issued under the Central Excise Act, 1944 is available to the assessee. Further, from the legal provisions as contained in Rule 3(1)(vii) of the Cenvat Credit Rules, 2004, it transpires that the assessee is eligible to take Cenvat Credit of the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 equivalent to the duty of excise specified under clauses (i), (ii), (viii), (iv), (v), (vi), (vii) and (viia) of the Rule 3 ibid. The duty of excise on the coal imported by the assessee as specified in the first schedule to the Central Excise Tariff Act, 1985 is 6% and the effective rate is 1% or 2% vide Notification No. 12/2012-CE dated 17.03.2012, as amended, subject to the condition stated therein. In this case, 2% Additional Duty on imported steam coal/bituminous coal as per Notification No. 12/2012-Cus dated 17.03.2012 as amended by Notification No. 12/2013-Cus dated 01.03.2013 has been paid by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (i) is also applicable to credit of CVD under clause (vii). If there was any other intention of Legislature they would not have specifically mentioned equivalent to the duty of Excise specified under clauses (i), (ii), (viii), (iv), (v), (vi), (vii) and (via) . Thus, the notices are not legible to avail the credit of CVD equivalent to duty of excise if it is not eligible in clause (i). Any other meaning would be unfair for the local coal producers vis a vis imported coal, as if stand taken by notices is accepted, credit would not be available on indigenously procured coal but would be available on imported coal. This could never be the intention of legislature and therefore I do not find any substance or basis in the contention of the notices. 12. It would be appropriate to reproduce rule 3 of the CENVAT Credit Rules and it is as follows: RULE 3. CENVAT credit- (1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of - (i) The duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act: : Provided that CENV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 15. The Regional Advisory Committee of Hyderabad Zone, in its meeting held on February 9, 2015 considered this very issue at point No. 1 and concluded that CENVAT credit of additional duty of customs paid on imported goods under Customs Notification dated March 17, 2013 (and not under Central Excise Notification) is available for credit. The relevant portion of the minutes is reproduced below: MINUTES OF THE MEETING OF THE REGIONAL ADVISORY COMMITTEE, HYDERABAD ZONE HELD ON FEBRUARY 09, 2015. Point No. 1 Credit on imported coal:- Many manufactures are importing steam coal on payment of duties. As per Customs Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit of CVD paid on imported coal in terms of Rule 3(7) of Cenvat Credit Rules, 2004. Further, I find that the show cause notice has been issued by invoking extended period of limitation. As the Revenue itself has applied wrong provisions of law, therefore, the extended period of limitation is not invokable. In that circumstances, the impugned order is set aside. 17. This decision of the Tribunal was subsequently followed by the Tribunal in Jaypee Sidhi Cement Plant and the relevant portion of the decision is reproduced below : 4. It is submitted on behalf of the appellant that adjudicating authority below has wrongly made applicable the Notification No. 12/2012-C.E., dated 17-3-2012 to the facts and circumstances on a wrong presumption that the levy of CVD in dispute is since equal to the Excise duty leviable on the similar goods and manufactured in India, that the benefit of Customs Notification No. 12/12 has wrongly been denied vide Order. Learned Counsel has relied upon the decision of this Tribunal in the case of M/s. Hindalco Industries Ltd. vs. GST, Bhopal as was pronounced in Appeal No. E/50179/2018-SM vide Final Order No. 50876/2018, dated 8-3-2018 [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 12/2012, dated 17-3-2012. The restriction of Rule 3 is not applicable to the said notification. Above all, the Hon ble Supreme Court in the case of SRF Ltd. v. CC Chennai (2015 (318) E.L.T. 607 (S.C.)) has held that Excise Notification No. 12/2012 is applicable only in respect of any digged or manufactured coal and not in respect of imported coal. The import whereof is allowed to have exempted rate of CVD vide Customs Notification No. 12/2012-Cus. 9. In view of the entire above discussion, we are of the firm opinion that the adjudicating authority has committed a legal error while denying the benefit of reduced CVD on imported coal while placing reliance upon the Excise notification for manufacture of coal. (emphasis supplied) 18. The same view was taken by the Tribunal in Asahi Songwon Colors and the relevant paragraph is reproduced below: From the above Rule, it is observed that even if any duty is paid by availing exemption Notification No. 12.2012-CE dated 17.03.2012, the same will not be available as Cenvat credit for the user of the goods. In the present case, admittedly, the appellant have imported Coal and CVD of 2% is leviable in terms of Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n notification 1 of 2011 and also the benefits under Sr. 67 and 128 of exemption notification 12 of 2012. In that view of the matter, the above noted proviso of the Rules, would disentitle the assessee from claiming CENVAT credit. Counsel for the assessee however submitted that this proviso refers to CENVAT credit of such duty of excise . In the present case, what the assessee has paid was the countervailing duty. The same may have been computed in terms of excise duty payable on local manufacturers, nevertheless, the same cannot be treated as duty of excise perse. He however candidly a greed that facility for getting CENVAT credit in the case of the present assessee flows from rule 3 of the Rules. As per subrule (1) of rule 3, a manufacturer or producer of a final product or a provider of output service would be allowed to take the CENVAT credit on the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act. Sub rule (1) rule 3 which gives the concession of availment of CENVAT credit of the duty paid, also uses the same expression duty of excise as is used in the proviso which restricts or limits the right of availment of such faci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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