CENVAT credit is admissible on concessional CVD paid on imported coal under the Customs notification.

Hindustan Zinc imported steam coal for use in captive thermal power plants and paid additional duty of customs (CVD) at concessional rates under Serial Nos. 122A/123 of Customs Notification No. 12/2012-Cus.

It claimed CENVAT credit of that CVD under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004.

The Revenue issued five show-cause notices covering periods from April 2012 to June 2017, contending that the credit was barred by the restrictions in Rule 3(1)(i); the Commissioner confirmed the demands.

The CESTAT set aside the Commissioner’s order, holding that the restrictions in Rule 3(1)(i) could not be imported into Rule 3(1)(vii).

The Union of India appealed, and the High Court framed a common substantial question of law.

Whether CVD paid at 1%/2% under Customs Notification No. 12/2012-Cus was eligible for CENVAT credit under Rule 3(1)(vii), notwithstanding the restrictions in Rule 3(1)(i) of the CENVAT Credit Rules, 2004.

Rule 3(1)(i) of the CENVAT Credit Rules, 2004 allows credit of specified excise duty but excludes credit where the relevant exemptions under the identified Central Excise notifications are availed; Rule 3(1)(vii) separately allows credit of additional duty leviable under Section 3 of the Customs Tariff Act, 1975, equivalent to the duties listed in clauses (i) to (via).

The Court treated the restriction in Rule 3(1)(i) as applying to the specified excise duty, not as an additional condition on CVD independently creditable under Rule 3(1)(vii), where the CVD was paid under a Customs—not Central Excise—notification.

The Court also relied on Hindalco Industries Ltd. v. GST, Bhopal, 2018 (363) E.L.T. 1085 (Tri.-Del.), and the Calcutta High Court’s decision in Commissioner of CGST & CX, Bolpur Commissionerate v. Shyam Steel Industries Ltd., which supported credit of CVD paid under the customs notification.

The Tribunal found that Hindustan Zinc had paid CVD under the customs notification and had neither paid the excise duty specified in Rule 3(1)(i) nor availed the relevant Central Excise exemptions that trigger that rule’s restrictions.

The High Court held that the Revenue’s argument improperly treated Rule 3(1)(vii) as incorporating the limitations in Rule 3(1)(i).

It found support for the Tribunal’s interpretation in the Regional Advisory Committee minutes, which considered CVD paid on imported coal under the customs notification eligible for credit, and in the authorities addressing the same issue.

The Tribunal’s finding was not substantially contradicted by the Revenue.

All five appeals were dismissed, with the parties bearing their own costs.