Eligibility of Cenvat Credit of Education Cess paid on CVD and SAD for inputs received from 100% EOU.

PJ-Case law-2013/14-1586

Case:-M/s TURBO ENERGY LTD Vs COMMISSIONER OF CENTRAL EXCISE (LTU), CHENNAI

Citation:-2013-TIOL-632-CESTAT-MAD

Brief Facts:-By a common order, the Commissioner disposed of two show-cause notices and hence, theapplicants have filed two appeals. The applicant filed these applications for waiver of pre-depositof Cenvat Credit of Rs.6,69,48,011 /- under Rule 14 of the Cenvat CreditRules, 2004read with proviso to Section 11A (1) of the Central Excise Act, 1944 and penalty of equalamount under Rule 15(2) of the CENVAT Credit Rules, 2004. The issue involved in this case, iseligibility of Cenvat Credit on Education Cesses paid on CVD and the Additional Customs Dutypaid under Section 3(5) of the Customs Tariff Act (SAD) in respect of the inputs received from100% EOUs. The period of dispute is Apri.'07 to 6th Sept.'09.

Appellant Contention:-The applicant submits that on an identical issue, the Tribunaldecided appeals in favour of the applicant. The relevant case laws are as under:-

(i) Tyche Industries Ltd, Kakinada (A.P.) Vs Commissioner of Central Excise, Visakhapatnam = (2010-TIOL-810-CESTAT-BANG).

(ii) Shreya Pets Pvt. Ltd. Vs Commissioner of Customs & Central Excise, Hyderabad-IV - [2009 (240) E.L.T. 408 (Tri.- Bang.)) = (2008-TIOL-2305-CESTATBANG).

(iii) Emcure Pharmaceuticals Ltd. Vs Commissioner of Central Excise, Pune - [2008 INDLAW CESTAT 698] = (2008-TIOL-226-CESTAT-MUM).

(iv) M/s. Venkateshwara Precision Components Vs Commissioner if Central Excise, Chennai - (2010-TIOL-1544-CESTAT-MAD).

He submits that it has been consistently held by the Tribunal that CVD referred under Rule 3(7)of the Cenvat Credit Rules, 2004 includes not only Additional Duty under the Customs Act butalso additional duty levied under Section 3(5) of the Customs Tariff Act, Education Cess andSecondary & Higher Education Cess. The learned counsel for the applicant also submits thatthe demand of duty is partly barred by limitation.

Respondent Contention:-The Revenue submits that by Notification No.22/2009- CE(NT), dated07.09.2009, in Rule 3(7) Clause (a) of the Cenvat Credit Rules, 2004, after the proviso,another proviso was inserted. He submits that new proviso was inserted on 07.09.2009 allowedcredit on additional duty under Section 3(5) of the Customs Tariff Act, and Educational Cesses.He also submits that this notification has no retrospective effect.

Reasoning of Judgement:-There is no dispute that theapplicant availed Cenvat Credit on the basis of formula specified in the said Rules. The Tribunalin the above decisions held that the term ' CVD ' referred in the formula would cover additionalduty both leviable under Section 3(1) and 3(5) of the Customs Tariff Act and EducationCesses. In this context, we reproduce the relevant portion of the decision of the Tribunal in thecase of M/s. Venkateshwara Precision Components (referred to in Para 2 above):"7. I have carefully considered the submissions from both sides and perused therecords. In the present case, the unit which has supplied the inputs is a 100% EOUand the duties leviable on goods cleared from such units is as per proviso toSection 3 of the Central Excise Act, 1944, which reads as under:-

"Provided that the duties of excise which shall be levied and collected on any[excisable goods which are produced or manufactured,-

(i) in a free [trade zone [or a special economic zone]] and brought to any other place in India; or
(ii) 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 wouldbe leviable [under the Customs Act, 1962 (52 of 1962) or any other law for thetime being in force] on like goods produced or manufactured outside India ifimported into India, and where the said duties of customs are chargeable byreference to their value, the value of such excisable goods shall, notwithstandinganything 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 (51of 1975)."

In other words, the duties leviable on goods manufactured in a 100% EOU is onpar with like goods imported into India. Rule 3 of the Cenvat Credit Rules allows amanufacturer to take credit of:-

(vii)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)]; (viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act............

In respect of inputs procured from 100% EOU, and Cenvat Credit Rules providesfor taking credit based on a formula prescribed under Rule 3(7) of the CenvatCredit Rules, 2004. The dispute is whether the term CVD used in the said" sub-rule3(7) refers only to additional duty leviable under Section 3(1) of the CustomsTariff Act or that the same also includes the additional duty leviable under subsection3(5) of the Customs Tariff Act. Undoubtedly, from 1.3.05, if the inputswere imported, the manufacturer would be eligible for cenvat credit of duties paidunder section 3(1) and section 3(5) of the Customs Tariff Act, 1975. Under thecircumstances, there is no warrant to treat the term CVD referred to in Rule 3 (7)of the Cenvat Credit Rules as applicable only to additional duty leviable underSection 3(1) of the Customs Tariff Act. The term CVD has not been specificallydefined in the Cenvat Credit Rules, but it has been explained that "BCD & CVDdenote advelorm rates in per cent, of basic customs duty and additional duty ofcustoms leviable ". Therefore, taking into account that from 1.3.05, the additionalduty levied under Section 3(5) has also been made eligible for credit, it would beproper to hold that the term CVD referred to in the formula would refer to bothvarieties of additional duties leviable under Section 3(1) and 3(5) of the CustomsTariff Act, 1975. As per the General Clause Act, when the context requires theword used in singular can mean in plural and, therefore, the term CVD can meanthe two CVDs.

It is noted that even after insertion of new proviso in Rule 3(7) of Cenvat CreditRules,formula is still retained in the said Rules. Prima facie, we are of the view that the present caseis covered by decision of the Tribunal as mentioned above. Hence the applicants are entitled togrant stay of recovery of dues till the disposal of appeals. Pre-deposit of the entire amount ofduty, penalty and interest is waived during the pendency of the appeal. Both the stayapplications are allowed. However, considering the high stake of dues involved, we fix theappeal for hearing on 02.04.2013.

Decision:-Pre-deposit waived.

Comment:-It was concluded in this case that the term CVD referred in Rule 3(7) of the Cenvat Credit Rules is also applicable to SAD leviable under section 3(5) of the Customs Tariff Act and accordingly credit is admissible for both the duties i.e., CVD and SAD.

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PJ-Case law-2013/14-1586

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