By TIOL News Service

MUMBAI, JAN 04, 2018: THE appellant had availed credit of CVD paid under Nine bills of entry through debit in DEPB passbook for the period November 2003 to September 2004 .

SCN was issued proposing disallowance of credit and imposition of penalty/interest on the ground that in terms of Para 4.3.5 of the Exim Policy the cenvat credit of CVD paid through DEPB is not eligible for credit.

The original authority observed that the restriction was removed w.e.f 28.01.2004 and since the clause is inconsistent with the modvat scheme, the benefit of credit was allowed.

Revenue went in appeal contending that the amendment made in policy w.e.f 28.01.2004 is prospective in nature and not retrospective. The Appellate Commissioner relied on the LB decision in Essar Steel - 2004-TIOL-807-CESTAT-DEL-LB and Deepak Spinners - 2005-TIOL-105-CESTAT-DEL and held that amendment made in EXIM Policy w.e.f 28.01.2004 has no bearing on the cenvatavailment as credit is available only when the duty is paid in cash. He set aside the adjudication order and confirmed the demand of Rs. 29,98,815/-.

The appellant is before the CESTAT.

It is submitted that the Notification No. 28 dt. 28.01.2004 of the EXIM Policy is clarificatory in nature and credit was always available; that even assuming that the notification was prospective in nature, the credit after issue of said notification could not have been denied; that the case of the department was that credit allowed prior to 28.01.2004 was not available whereas the Commissioner (Appeals) had erred in denying credit post 28.01.2004 also, therefore, Order-in-appeal to this extent is beyond the grounds in appeal filed by the revenue. Reliance is placed on the decisions SPIC Limited - 2013-TIOL-1233-HC-MAD-MISC and Mtz Polyfilms - 2010-TIOL-421-HC-AHM-CX to submit that the demand is hit by limitation since the issue was under dispute.

The Bench inter alia observed -

+ Only two bills of entry pertain to period prior to 28.01.2004 and remaining are after said period. The show cause notice proposed to disallow credit merely on the basis of analysis of para 4.3.5 which denied the credit. However, we find that once the para 4.3.5 was amended to remove the lines which denied credit of CVD paid through DEPB, the Appellant are eligible to avail cenvat credit.

+ The adjudicating authority had allowed the credit and the revenue had filed appeal before Commissioner (Appeals) only for the period prior to 28.01.2004 when the Para 4.3.5 was amended. The Appellate Commissioner, however, passed the order beyond the scope of appeal as he denied credit which was not sought to be denied by the department in their appeal i.e pertaining to period post 28.01.2004 also. Hence the impugned order is not sustainable on said count in case of seven bills of entry which are post 28.01.2004.

+ The Hon'ble Madras High Court in case of M/s SPIC Ltd supra has held that the prohibition imposed by the Para 4.3.5 would not be applicable in the year prior to year 2000 when there is no specific prohibition. Applying the same analogy to the period post 28.01.2004 when the prohibition was removed the cenvat credit cannot be denied and hence available to the Appellant.

+ In case of Bills of entry of period prior to 28.01.2004, we find that the show cause notice does not bring out any malafide intention on the part of the Appellant to avail ineligible credit. Even the issue involved is of interpretation and no malafide can be alleged…we hold that the demands for the period prior to 28.01.2004 involving two bills of entry in the present case are hit by limitation and the demand is not sustainable.

Holding that the impugned order is not sustainable, the same was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-68-CESTAT-MUM)