Legal principle

Conditions or restrictions contained in Central Excise exemption notifications cannot be implied into or superimposed upon Customs notifications, which must be interpreted strictly, and CVD paid under Section 3(1) of the Customs Tariff Act retains its character as a customs duty eligible for credit under Rule 3(1)(vii) of CCR 2004.

Court decision

The Tribunal rejected the Department's appeal and upheld the Commissioner (Appeals) order in favour of Agni Steels, holding that CENVAT credit of 1%/2% CVD paid on imported steam coal is admissible under Rule 3(1)(vii) of CCR 2004, that the proviso to Rule 3(1)(i) applies exclusively to duty of excise, and that restrictions from Central Excise notifications cannot be imported into Customs notifications; the denial of credit was unsustainable in law.

Facts

Agni Steels Pvt. Ltd. manufactures sponge iron (Chapter 72) and availed CENVAT credit of ₹1,60,20,657/- on CVD paid at the concessional rate of 1%/2% ad valorem on imported steam coal during June 2011 to September 2015, with a further demand of ₹6,66,356/- for October 2015 to March 2016. The Department alleged the credit was inadmissible under Rule 3 of the CENVAT Credit Rules, 2004, and issued a Show Cause Notice dated 02.02.2016 for recovery under Rule 14 of CCR 2004 read with Section 11A(4) of the Central Excise Act, 1944, with interest and penalty. The Adjudicating Authority confirmed a demand of ₹84,65,519/- with an equal penalty under Rule 15(2) of CCR 2004 read with Section 11AC(1)(c), but the Commissioner (Appeals) allowed the assessee's appeal and set aside the Order-in-Original. The Department then appealed to the CESTAT, Chennai.

Key provisions

• Section 3, Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 25, Customs Act, 1962 — Power to grant exemption from duty
• Section 3(8), Customs Act, 1962 — Classes of officers of customs