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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 ..... 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, certain capital goods i.e., plant and machinery were imported by the Petitioner during the years 2004-07 at a concessional rate of duty of only 5% in terms of the Customs Notification No. 97/2004-Cus dated 17th September, 2004. 4. In order to import the said capital goods, the Petitioner procured nine licenses/authorizations under the Export Promotion Capital Goods Scheme (hereinafter "EPCG authorizations"). The permission to import the said goods was on the condition that the Petitioner would utilize the imported plant and machinery and complete export obligations within a period of eight years, extendable by a further two years. The details of the said EPCG authorizations are as under: Export Obligations Fulfilled Sl. No. EPCG Authorization No. Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act or under any other law for the time being in force may be provided. 6. That Hon'ble Commission may provide any other relief, deemed fit, in the facts and circumstances of the case." 7. The Settlement Commission vide the impugned Final Order, considered the settlement application of the Petitioner, and accepted the payment of differential duty as also the interest in respect of import of the capital goods. The Settlement Commission did not direct confiscation of the said capital goods, however, penalty of Rs. 4,00,000/- was imposed. Finally, the Commission also granted immunity to the Applicant from prosecution, in terms of Section 127H of the Act. The prayer for CENVAT Credit paid towards the CVD, was however rejected. The reasoning given for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 customs duty was ultimately deposited along with interest in much later in 2018. 13. It is submitted that on the date when the differential duty was paid, Rule 4 of the CENVAT Rules stood amended vide notification dated 11th July, 2014 and credit could be claimed only within a period of one year from the date of issue of any documents mentioned in Rule 9 (1) of the said Rules. The Settlement Commission is, therefore, right in rejecting the claim for CENVAT Credit as being time barred. 14. Reliance is also placed by the ld. Counsel upon the following decisions - (i) Osram Surya (P) Ltd. vs. Commissioner of Central Excise, Indore, (2002) 9 SCC 20, (ii) Supreme Petrochem Ltd. vs. Commr. of Central Tax & C. Ex., Chennai, 2019 (28) G.S.T.L. 564 (Mad.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice, 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; PROVIDED FURTHER that the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer: PROVIDED ALSO that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year: PROVIDED ALSO that the CENVAT credit in respect of capital goods may be taken by the provider of output service when the capital goods are delivered to such provider, subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 rights which had accrued to the manufacturers under the Scheme of MODVAT. That vested right continues to be in existence and what is restricted is the time within which the manufacturer has to enforce that right. The appellants, however, contended that imposition of a limitation is as good as taking away the vested right. In support of their argument, they have placed reliance on a judgment of this Court in Eicher Motors Ltd. v. Union of India [(1999) 2 SCC 361] wherein this Court had held that a right accrued to an assessee on the date when it paid the tax on the raw materials or the inputs would continue until the facility available thereto gets worked out or until those goods existed. In that background, this Court held that by Section 37 of the Act, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 months from the date of issue of any of the documents specified in the first proviso to the said sub-rule. A plain reading of this sub-rule clearly shows that it applies to those cases where a manufacturer is seeking to take the credit after the introduction of the Rule and to cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer received the inputs. This sub-rule (sic proviso) does not operate retrospectively in the sense it does not cancel the credits nor does it in any manner affect the rights of those persons who have already taken the credit before coming into force of the Rule in question. It operates prospectively in regard to those manufacturers who seek to take credit after the coming i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 beyond the Show Cause Notice inasmuch as the Commissioner has held that the appellants have not mentioned anywhere in the reply during the personal hearing that the imported plant installed are in use and that the appellants have not claimed the benefit of the depreciation. A perusal of the Show Cause Notice does not reveal any such allegation as regards depreciation. The Chartered Accountant's certificate has been produced and we find therefore no reasons to uphold the order on the ground of depreciation having been claimed. The plea of the order traverse beyond the Show Cause Notice is upheld and the order is also required to be set aside on this account." 24. Thus, the CESTAT was of the view that the Appellant therein was entitled to receive CENVA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest. 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 could not be denied due to procedural irregularities. Accordingly, the Settlement Commission had permitted CENVAT Credit adjustment of the CVD amount paid. The Court held that the right to CENVAT Credit accrues on the same day when the inputs are received and the tax is paid on the same. It also held that Rule 4 (1) of the CENVAT Credit Rules prescribing time limit would not apply to consignments where the imports took place prior to the date of the amendment. The observations of the Court are as under: "15. In the present case, we are concerned with the amendment to the rule 4 of the CCRs with effect from July 11, 2014, which reads thus : "Provided also that the manufacturer or the provider of output services shall not take Cenvat credit after six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 gives several advantages to the Assessees and the disputing parties mainly in the form of immunity from penalty and prosecution, which rigor of law would have been otherwise applicable to the Assessee besides the determination of disputed amount of duty under the provisions of the Act. The impermissibility of reopening of the order passed by the Settlement Commission in any proceeding under the Customs Act itself or under any other law does not only mean Assessment or other legal proceedings, but the said provision is intended to put an end to any possibility of later on tinkering, modification, adjustment or disturbance of what has been achieved by that order. 17. The novel argument of the Learned Counsel for the Assessee that the customs duty paid und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 applicability of Rule 9 (1) (b) of the Cenvat Credit Rules, 2004, we find that the denial of Cenvat Credit to the Assessee in the present case independently was also justified. 21. Viewed from any angle, we do not find any merit in the contention raised by the Learned Counsel for the Assessee that the Assessee was independently entitled to Cenvat Credit in respect of the CVD paid by it under the orders of the Customs (sic) Settlement Commission in the present case under the provisions of Cenvat Credit Rules, 2004. Thus, the present Appeal of the Assessee is liable to be dismissed." 29. The Madras High Court thus came to the conclusion that the proceedings before the Settlement Commission had resulted in immunity from prosecution and penalty for the Appellant th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench 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 invoked in the SCN. The relevant portion of the impugned order is as under: "(ii) The Bench finds Customs Notification 97/2004-Cus dated 17.09.2004 as amended is a conditional Notification and condition no (4) of the said Notification required an importer to produce evidence of discharge of export obligation within stipulated time period of 8 years from the date of issue of the Authorization, unless extended by Directorate General of Foreign Trade. The Bench further finds that para 5.8.3 of the Hand Book of Procedures (2004-09), required that if export obligation was not fulfilled in any particular block, the authorization holder shall pay to Custom Authorities, proportionate Customs duty on the unfulfilled portion of export obligation along with intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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