Delhi High Court
Janki Newsprint Ltd vs Principal Commissioner Of Customs New … on 12 March, 2025
Author: Prathiba M. Singh
Bench: Prathiba M. Singh, Dharmesh Sharma
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 13th February, 2025
Date of decision:12th March, 2025
+ W.P.(C) 1919/2020
JANKI NEWSPRINT LTD .....Petitioner
Through: Mr. Pradeep Jain and Mr. Sambhav
Jain, Advs.
versus
PRINCIPAL COMMISSIONER OF CUSTOMS NEW CUSTOMS
HOUSE, AIR CARGO IGI AIRPORT, NEW DELHI .....Respondent
Through: Mr. Akshay Amritanshu, Sr. SC,
CBIC with Ms. Drishti Saraf and Ms.
Pragya Upadhyay, Advs. (M:
9931282222)
CORAM:
JUSTICE PRATHIBA M. SINGH
JUSTICE DHARMESH SHARMA
JUDGMENT
Prathiba M. Singh, J.
1. The present petition has been filed by the Petitioner under Article 226
of the Constitution of India, inter alia, challenging the impugned Final Order
No. F-3479/CUS/2019-SC(PB) dated 23rd January, 2019 passed by the
Customs, Central Excise & Service Tax Settlement Commission, Principal
Bench, New Delhi (hereinafter “the Settlement Commission”) under Section
127C(5) of the Customs Act, 1962 (hereinafter “the Act”).
2. Vide the impugned Final Order, the Settlement Commission, inter alia¸
has rejected the claim of the Petitioner for CENVAT Credit of the
‘countervailing duty’ (hereinafter “CVD”) paid on the imported capital goods.
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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. EPCG Date Status of
No. Authorization No. license/authorization
1. 0530142266 31.10.2006 EO fulfilled. Applied
for EODC
2. 0530143070 14.02.2007 EO fulfilled. Applied
for EODC
3. 0530136780 12.08.2004 EO fulfilled. Applied
for EODC
4. 0530138461 21.04.2005 EODC issued by
DGFT
5. 0530138462 2104.2005 EODC issued by
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Export Obligations Not Fulfilled
Sl. EPCG Date Status of
No. Authorization No. license/authorization
1. 0530139551 16.09.2005 Export obligation not
fulfilled. However,
duty and interest
deposited after
issuance of show
cause notice.
2. 0530140224 05.01.2006 Export obligation not
fulfilled. However,
duty and interest
deposited after
issuance of show
cause notice.
3. 0530140824 04.04.2006 Export obligation not
fulfilled. However,
duty and interest
deposited after
issuance of show
cause notice.
4. 0530141233 02.06.2006 Export obligation not
fulfilled. However,
duty and interest
deposited after
issuance of show
cause notice.
5. Since the export obligations were not fulfilled qua four EPCG
authorizations, as mentioned above, an investigation was commenced by the
Directorate of Revenue Intelligence, Noida Regional Unit (hereinafter “DRI”)
and the Show Cause Notice (hereinafter “SCN”) was issued on 28th February,
2018. In the said SCN, the Respondents sought to:
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i) Confiscate the said capital goods under Section 111(o) of the
Act;
ii) Raise a demand of the differential customs duty which was
saved/foregone on the said capital goods for a sum of Rs.
49,43,666/- and Rs.31,71,143/- along with the interest and
penalty for the imports made through Nhava Sheva and Air
Cargo Delhi, respectively.
6. After the show cause notice was issued, the Petitioner approached the
Settlement Commission by way of an application under Section 127B of the
Act to have the case settled. In the said application, the Petitioner admitted
and accepted that the duty payable for settlement is Rs.31,71,143/- and
interest is to the tune of Rs.50,29,597/-. The Petitioner, in addition to praying
for adjustment of the differential duty, also sought to avail the CENVAT
Credit in respect of the CVD paid on the imported goods. The prayer in the
said settlement application was as under:
“1. That the amount of Rs.82,01,100/- (31,71,143/-
as duty + 50,29,957/- as interest) paid by the
Applicant may be accepted as the full and final
payment of duty and interest thereon.
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
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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 rejection of
the same is as under:
“(iii) As regard the claim of CENVAT credit of CVD
for the period 2004-2007 which the applicant
claimed now at the time of filing Settlement
Application on 15.10.2018, the Bench finds that
there was restriction of 1 year under Rule 4(1) of
Cenvat Credit Rules, 2002, which states that “the
manufacturer or provider of output service shall not
take Cenvat Credit after one year of the date of issue
of any of the documents specified in sub rule (1) of
Rule 9. The Bench finds that applicants claim of
credit of CVD on 15.10.2018 i.e on date of filing the
Settlement Application for the period 2004-2007
was barred by time. The Bench finds that vested
rights of applicant for availing credit of CVD
remained, what was restricted was time for availing
such credit and relies upon case law of Hon’ble
Supreme Court in case of Osram Surya (P) Ltd. V/s.
CCE, Indore – 2002-TIOL-64-SC-CX.”
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8. The Petitioner being aggrieved by the impugned Final Order passed by
the Settlement Commission has preferred the present petition, only to the
limited extent of the rejection by the Settlement Commission of the claim of
CENVAT credit for the CVD.
II. Submissions on behalf of the Parties
9. The submission of Mr. Pradeep Jain, ld. Counsel appearing for the
Petitioner is that under Rule 4(2) of the CENVAT Credit Rules 2004
(hereinafter “CENVAT Rules”), the Petitioner is entitled to claim credit for the
whole amount of duty paid, if the same is claimed in the same year as the year
in which the said duty has been paid.
10. It is his submission that since the entire duty amount has been paid by
the Petitioner, CENVAT Credit cannot be refused to the Petitioner. He further
relies upon the decision of the Central Excise & Service Tax Appellate
Tribunal, Mumbai (hereinafter “CESTAT, Mumbai”) in Philips India Ltd. vs.
Commissioner of Central Excise, Vadodara, 2005 (191) E.L.T. 1028 (Tri. –
Mumbai) wherein under similar circumstances, the CENVAT Credit of the
CVD was allowed. It is submitted by the ld. Counsel that the said decision of
the CESTAT, Mumbai has been upheld by the Gujarat High Court in
Commissioner of C. Ex. & Customs v. Philips India Ltd., 2006 SCC OnLine
Guj 460.
11. Reliance is also placed upon a Circular No. 199/33/96-CX dated 23rd
April, 1996 issued by the Central Board of Excise & Customs (hereinafter
“CBIC”) as per which, it is clarified 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.
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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.), (iii) Commissioner of
Central Excise Chennai-I v. Amalgamations Valeo Clutch Pvt. Ltd., 2006
(206) E.L.T. 91 (Mad.), in support of his submissions.
15. It is his submission that under similar circumstances when the
differential duty was paid before the Settlement Commission, the Madras
High Court in Supreme Petrochem Ltd. (supra) has clearly held that credit
could not be claimed under the CENVAT Rules by the concerned party, which
had not, on its own, deposited the said duty.
16. In rejoinder, Mr. Jain, ld. Counsel for the Petitioner has placed reliance
on the decision of a Co-ordinate Bench of this Court in Global Ceramics Pvt.
Ltd. vs. The Principal Commissioner of Central Excise, Delhi -1,
2019:DHC:2832-DB, wherein it was held that the amendment to Rule 4(1) of
the CENVAT Rules prescribing a time limit for claiming CENVAT Credit
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will not apply to consignments where import took place prior to the date of
amendment.
III. Analysis and Findings
17. The short question in this case is whether the Petitioner can avail
CENVAT Credit for the CVD qua the imported capital goods in terms of Rule
4 of the CENVAT Credit Rules, 2004.
18. A perusal of the impugned Final Order would show that the Settlement
Commission has applied Rule 4(1) of the CENVAT Rules and held that the
prayer for the said credit was barred by time. The capital goods were imported
by the Petitioner between the year 2004 and 2007. However, the differential
duty applicable to the said imports was paid only in 2018 i.e., after
approaching the Settlement Commission post the issuance of the SCN. The
relevant provisions of the Rule 4 of CENVAT Rules which deals with the
conditions for allowing of CENVAT Credit read as under:
“RULE 4. Conditions for allowing CENVAT credit. —
(1) […]
Provided also that the manufacturer or the provider of
output service shall not take CENVAT credit after one
year of the date of issue of any of the documents
specified in sub-rule (1) of rule 9.
(2)(a) The CENVAT credit in respect of capital goods
received in a factory or in the premises of the provider
of output service or outside the factory of the
manufacturer of final products for generation of
electricity for captive use within the factory or in the
premises of the job worker, in case capital goods are
sent directly to the job worker on the direction of the
manufacturer or the provider of output service, as the
case may be, at any point of time in a given financialSignature Not Verified W.P.(C) 1919/2020 Page 8 of 25
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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 to maintenance of documentary
evidence of delivery and location of the capital goods.
Explanation: For the removal of doubts, it is hereby
clarified that an assessee shall be “eligible” if his
aggregate value of clearances of all excisable goods for
home consumption in the preceding financial year
computed in the manner specified in the said notification
did not exceed rupees four hundred lakhs.”
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19. The third proviso to Rule 4(1) imposing the period of limitation was
introduced vide Notification No. 21/2014-Central Excise (N.T.) dated 11th
July 2014 which came into effect on the same date. The period of limitation
of six months was later extended to one year vide Notification No. 6/2015-
Central Excise (N.T) dated 1st March, 2015 which came into effect on the
same date.
20. The above provision relating to claim of CENVAT Credit has been
considered in a number of decisions by different forums. The cases laws
referred by the parties in this regard are discussed hereinafter.
21. In Osram Surya (Supra), the Supreme Court was seized with the
question whether manufacturers who had imported goods prior to the
amendment to Rule 57-G of the Central Excise Rules, 1944, (hereinafter
“1944 Rules”) could claim MODVAT credit post the said amendment. Vide
the amendment to Rule 57-G, the manufacturers could avail credit only within
a period of six months from the date of issuance of documents mentioned in
the proviso to the said Rule. Relying on the said amendment, the claims of the
Appellants therein were rejected by the revenue authorities as being time
barred. The Appellants challenged the said decision. In the said challenge, the
Supreme Court held that credit cannot be sought beyond the period of six
months, though the import was made prior to the amendment. Further, the
manufacturers’ vested rights prior to the amendment in claiming the credit
was held not to be affected by the amendment. However, the said amendment
did limit the time within which the same could be claimed. The relevant
portions of the said judgment are extracted herein below:
“6. At the outset, we must note that none of the
appellants has challenged d the validity of the saidSignature Not Verified W.P.(C) 1919/2020 Page 10 of 25
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proviso, therefore, we will have to proceed on the basis
that the proviso in question is a valid one. In that
background, the sole question that we will have to
consider will be: whether the proviso to the Rule in
question 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, the authorities concerned cannot
make a rule which could take away the said right on
goods manufactured prior to the date specified in the
rule concerned. In the facts of Eicher case [(1999) 2
SCC 361] it is seen that by introduction of Rule 57-F(4-
A) to the Rules, a credit which was lying unutilized on
16-3-1995 with the manufacturer was held to have
lapsed. Therefore, that was a case wherein by
introduction of the Rule a credit which was in the
account of the manufacturer was held not to be
available on the coming into force of that Rule, by thatSignature Not Verified W.P.(C) 1919/2020 Page 11 of 25
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the right to credit itself was taken away, whereas in the
instant case by the introduction of the second proviso to
Rule 57-G, the credit in the account of a manufacturer
was not taken away but only the manner and the time
within which the said credit was to be taken or utilized
alone was stipulated. It is to be noted at this juncture
that the substantive right has not been taken away by
the introduction of the proviso to the Rule in question
but a procedural restriction was introduced which, in
our opinion, is permissible in law. Therefore, in our
opinion, the law laid down by this Court in Eicher case
[(1999) 2 SCC 361 : (1999) 106 ELT 3] does not apply
to the facts of these cases. This is also the position with
regard to the judgment of this Court in CCE v. Dai Ichi
Karkaria Ltd. [(1999) 7 SCC 448]
8. It is vehemently argued on behalf of the appellants
that in effect by introduction of this Rule, a
manufacturer in whose account certain credit existed,
would be denied of the right to take such credit
consequently, as in the case of Eicher [(1999) 2 SCC
361] a manufacturer’s vested right is taken away,
therefore, the Rule in question should be interpreted in
such a manner that it did not apply to cases where the
credit in question had accrued prior to the date of
introduction of this proviso. In our opinion, this
argument is not available to the appellants because
none has questioned the legality or the validity of the
Rule in question, therefore, any argument which in
effect questions the validity of the Rule, cannot be
permitted to be raised. The argument of the appellants
that there was no time whatsoever given to some of the
manufacturers to avail the credit after the introduction
of the Rule also is based on arbitrariness of the Rule,
and the same also will have to be rejected on the ground
that there is no challenge to the validity of the Rule.
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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
into force of this Rule. Therefore, in our opinion, the
Tribunal was justified in holding that the Rule in
question only restricts the right of a manufacturer to
take the credit beyond the stipulated period of six
months under the Rule. Therefore, this appeal will have
to fail.”
22. The Supreme Court also clarified the retrospective and prospective
effect of the said amended proviso to Rule 57-G of the 1944 Rules. Thus, as
per the Supreme Court the limitation introduced via amendment to the Rule
57G would be applicable against any manufacturer claiming credits after the
said amendment came into force.
23. In Philips India (supra) the CESTAT, Mumbai was dealing with
similar facts wherein the Appellant therein had imported certain capital goods
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under the EPCG Scheme and failed to fulfill the export obligations under the
said scheme. The goods were exported in the year 1994-1995 and the
applicable duty was paid only after the order of the Settlement Commission.
Thereafter, a claim was raised for CENVAT Credit in May, 2003 which was
rejected by the Commissioner of Customs inter alia on the ground that the
same is time barred. The said order of the Commissioner was appealed before
the CESTAT, Mumbai. The findings of the Tribunal are reproduced
hereunder:
“(g) We find that there is no provisions under the Central
Excise Act or the Rules which prescribes a period within
which credit of duty paid on the capital goods should be
entered as taken in the register maintained. The intention
of the Commissioner therefore for denying this credit
cannot be upheld. In fact, it is found that Circular No.
199/33/96-CX, dated 23-4-1996 clarifies that time limit of
six months prescribed in 2nd proviso to Rule 57G will not
apply to availment of credit on capital goods under Rule
57-I and these instructions have been issued by the Board
in consultation with the Ministry of Law. The Tribunal in
the case of Surya Prabha Mills Limited v. Commissioner
of Central Excise, Coimbatore reported in 2002 (149)
E.L.T. 929 has held that no restriction in time limit, fixed
for taking credit in respect of capital goods could be
found by them. The reliance of the Commissioner upon the
decision of the Hon’ble Tribunal in the case of MRF Ltd.
v. CCE, Madras reported in 1996 (88) E.L.T. 222 and
associated Flexible & Wires Pvt. Ltd. v. Commissioner of
Central Excise and Customs, Pune reported in 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
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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 CENVAT Credit since the rules at the time of the import
of the concerned capital goods would be applicable. The decision of the
CESTAT has been upheld in appeal by the Gujarat High Court in
Commissioner of C. Ex. & Customs v. Philips India Ltd (supra).
25. At this stage it would be apposite to refer to the Circular dated 23rd
April, 1996 issued by CBIC which has been relied upon by the Petitioner,
which reads as under:
“Notification No. 28/95-C.E. (N.T.), dated 29-6-1995
was issued whereby Rule 57G was amended providing
that the manufacturer is allowed to take credit of duty
paid on inputs within six months of the date of issuance
of any of the duty paying documents as prescribed under
Rule 57G of the Central Excise Rules.
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2. Representations have been received from the Trade
as to whether the aforesaid time limit of six months will
also apply with respect of MOD- VAT credit to be
availed on capital goods, as in the case of capital goods
it may not be always possible to avail the credit within
six months from the date of issuance of the documents.
3. The matter has been examined by the Board in
consultation with Ministry of Law and it is hereby
clarified that the time limit of six months as prescribed
under second proviso to Rule 57G will not apply to
availment of credit on capital goods under Rule 57T of
the Central Excise Rules, 1944.
4. Trade and field formations may be advised
accordingly.
5. Receipt of this Circular may please be
acknowledged.”
26. In Amalgamations Valeo Clutch (supra) the High Court of Madras
was considering a case wherein MODVAT was claimed by the importer after
the period of limitation under Rule 57G of the 1944 Rules. The High Court
relied on the decision of the Supreme Court in Osram Surya (supra) and the
six months period for availing of credit under Rule 57G was held to be
applicable and accordingly the credit was refused.
27. In Global Ceramics Pvt. Ltd. (supra) a Co-ordinate Bench of this Court
was considering a case where certain ceramic tiles had been imported and due
to the products being sold higher than the MRP, a show cause notice was
issued demanding differential duty and penalty. At the time of the import, the
company had paid the basic customs duty, the CVD and Education Cess. The
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company preferred an application before the Settlement Commission and at
that stage, the company admitted duty liability along with interest. 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 months of the date of issue of any
of the documents in sub-rule (1) of rule 9.”
16. It is in terms of this amendment that it was
provided that the Cenvat credit must be taken within
one year of the issue of invoice for input goods or
input services.
17. There is substance in the contention of the
learned counsel for the assesses in both the cases
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that the above amended provision cannot be given
retrospective effect. As explained in Eicher Motors
Ltd. v. Union of India (supra) the rule of lapse of
credit lying with it unutilized on the date of
amendment, cannot be applied to the goods
manufactured prior to the date of the amendment.
This is based on the principle that the right to
adjustment of tax on final products accrues to an
assessee on the date when they paid the tax on the
raw materials and that right would continue until the
facility available thereto gets worked out. In fact, the
judgment in Osram Surya (P.) Ltd. v. CCE (supra)
approvingly refers to the judgment in Eicher Motors
Ltd. v. Union of India (supra).
[…]
22. Consequently, in the present case, the
Court is satisfied that the Amendment to Rule 4(1)
CCRs prescribing a time limit for claiming Cenvat
Credit will not apply to the consignments in the
present case where the import took place prior to the
date of the amendment and the deemed manufacture
took place when the MRP was altered, which also
happened prior to the amendment. In other words,
the CVD paid by the BRCPL will have to be
permitted to be adjusted against the CE duty settled
as will the service tax paid on the input services.”
28. In Supreme Petrochem Ltd. (supra) the Appellant concerned had
imported certain goods from South Korea and declared an assessable value.
The Department found that the said goods were undervalued, and the show
cause notice was served demanding additional customs duty. At that stage,
the Petitioner approached the Settlement Commission. The Commission
imposed the duty liability and granted immunity from prosecution and
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penalty. After paying the duty, the Petitioner claimed the amount as CENVAT
Credit. The Department took the position that no credit is available when there
was wilful misstatement of facts under Rule 9(1)(b) of the Rules. The
CENVAT Credit was finally disallowed by the adjudicating authority and
interest was also imposed. The appeals before Commissioner and the
CESTAT were dismissed 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 under the
orders of the Settlement Commission is nothing but
CVD, which, per se, is allowable as Cenvat Credit is
oversimplification. What is not provided in law
cannot be granted. The initial proceedings initiatedSignature Not Verified W.P.(C) 1919/2020 Page 19 of 25
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against the Assessee in the present case itself
proceeded on the basis of the allegation against the
Assessee that the Assessee had undervalued the
value of the imported goods, which were shown to
have been imported as ‘free of cost’ from a related
party in South Korea and, therefore, there was a
purported evasion of Customs Duty by the Assessee.
Sooner the Show Cause Notice with these
allegations was served upon the Assessee, the
Assessee took shelter before the Settlement
Commission for avoiding the rigmarole of all these
assessment and penalty proceedings before the
regular authorities of the Act, namely, the
Assessment or the Appellate proceedings. Once the
Assessee obtained a favourable order from the
Settlement Commission and paid the Customs Duty
determined to the tune of Rs. 18,01,115/, there was
no scope left for the Assessee to claim such amount
in the form of refund or adjustment either under the
Customs Act itself or under any other law, including
the Central Excise Act and the Cenvat Credit Rules.
18. Giving a finality and conclusiveness to the
orders of the Settlement Commission has to be taken
to its logical end and the position inter se between
the parties flowing from the order of the Settlement
Commission cannot be allowed to be disturbed in
any manner, much less any indirect gain or duty paid
can be allowed to be taken back by the Assessee
under the provisions of any other law, including the
Central Excise Act and the Cenvat Credit Rules.
Therefore, we do not find any merit in the said
contention of the Assessee and the same is liable to
be rejected, which is, accordingly, rejected.
19. The case of the Revenue that even Rule 9(1)(b)
of the Cenvat Credit Rules, 2004, prohibits the credit
of excise duty or customs duty in case the same hasSignature Not Verified W.P.(C) 1919/2020 Page 20 of 25
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been paid and recovered from the Assessee on
account of earlier non-levy or short-levy, by reason
of fraud, collusion, wilful misstatement or
suppression of facts, also has considerable force.
20. The contents of the Show Cause Notice in the
present case, would clearly reveal that the case of
the Revenue against the Assessee in the said Show
Cause Notice was that of misstatement of facts and
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 therein. It was only after the
show cause notice was issued alleging misstatement of facts and suppression
that the duty amount was paid. Further, it was held that once the proceedings
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have attained finality the same cannot be re-opened or modified for either
imposition of liability or for claiming any benefit including under the
CENVAT Credit Rules. Thus, the claim for CENVAT Credit was rejected
rightly by the Madras High Court.
30. In Global Ceramics (supra), the Court was dealing with CENVAT
Credit in respect of inputs for the domestic market which is governed by Rule
4(1) of the CENVAT Credit Rules. In the present case, the Court is dealing
with CENVAT Credit in respect of capital goods under Rule 4(2) of the
CENVAT Credit Rules. Further, it is noted that the Court did not discuss the
decision of the Supreme Court in Osram Surya (supra) wherein it is clearly
held that the second proviso to Rules 57-G of the 1944 Rules (which is
identical to the third proviso to Rule 4 of the CENVAT Credit Rules) would
be applicable qua manufacturers claiming credit after introduction of the said
proviso. Thus, the limitation introduced via the amendment would affect any
claim raised after the amendment came into effect.
31. In the facts of the present case, the Petitioner did not by itself
voluntarily deposit the duty and penalty. The admitted position is that out of
nine EPCGs, qua four EPCGs, the export obligation was not fulfilled. A
substantial period of time i.e., 8 years was given to the Petitioner for fulfilling
its export obligations. Extension of two years was also given qua certain
EPCGs. After the said extended period had also expired, the show cause
notice was issued. The DRI then started investigation in respect of the
unfulfilled export obligation. Even at that stage, the customs duty along with
interest was not paid by the Petitioner. Only after the investigation was started,
the Petitioner tendered the said amount in order to avoid prosecution and
approach the Settlement Commission. The confiscation of goods also could
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not also take place as the goods were no longer available for confiscation
which is clearly captured in the order of the Settlement Commission. The
relevant paragraph of the order is set out below:
“Fine: As the goods in respect of past imports to which
confiscation has been proposed in the SCN, are not
available for confiscation, the Bench 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 interest, however the
applicant did not pay the Customs duty along with
interest, and the same was paid only after the
investigation was initiated by DRI. The Bench finds that
Shri Sumit Garg, Director of the applicant firm in his
statements dated 9.9.2016, 4.5.2017, 16.11.2017
admitted that they have neither fulfilled the exportSignature Not Verified W.P.(C) 1919/2020 Page 23 of 25
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obligation mandated in the said EPCG Authorization
nor deposited Customs duty saved/foregone along with
interest on the Capital goods imported against the said
EPCG Authorization. Had the investigations not
initiated against the DRI, this fraud would not have
been detected. In view of above, the Bench finds that
applicant is liable to penal action under the provisions
invoked in the show cause notice.”
33. The above observations have not been challenged by the Petitioner.
34. The purpose of approaching the Settlement Commission is to ensure
that there is a finality to the determination by the Settlement Commission.
Under Section 127(j) of the Act, the order passed by the Settlement
Commission is conclusive.
35. The decision in Osram Surya (supra) followed by the recent decision
of the Madras High Court in Supreme Petrochem Ltd. (supra) is clear to the
effect that under such circumstances, credit cannot be given to a party which
has deliberately not complied with the law. The Settlement Commission is
right in holding that if the DRI had not started the investigation, the
irregularity would have gone completely unnoticed and unchecked. The
Petitioner had sufficient time to complete its export obligation and upon
failure to do so, it ought to have voluntarily deposit the duty with interest,
which he did not do. After having flagrantly violated and not complied with
its export obligation, the Petitioner cannot be seen to derive double advantage
by seeking CENVAT Credit for the CVD.
36. In the opinion of this Court, the Settlement Commission’s order does
not warrant any interference.
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37. The petition is accordingly dismissed. Pending applications, if any, are
also disposed of.
PRATHIBA M. SINGH
JUDGE
DHARMESH SHARMA
JUDGE
MARCH 12, 2025
Rahul/msh
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