CENVAT credit is admissible on concessional CVD paid on imported steam coal; excise restrictions cannot be imported into customs notifications.

Agni Steel Pvt. Ltd. manufactured sponge iron and availed CENVAT credit under the CENVAT Credit Rules, 2004 (“CCR 2004”). Between June 2011 and September 2015, it availed credit of ₹1,60,20,657 on CVD paid on imported steam coal.

The Department alleged that CVD paid at the concessional rate of 1%/2% was ineligible for credit under Rule 3 of the CCR 2004 and issued a show-cause notice proposing recovery, interest and penalty.

A further demand of ₹6,66,356 was raised for October 2015 to March 2016.

The adjudicating authority confirmed credit demand of ₹84,65,519 with an equal penalty and dropped the balance demand.

The Commissioner (Appeals) allowed the assessee’s appeal and set aside the adjudication order. The Department challenged that decision before the Tribunal; the assessee filed cross-objections.

1. Whether CENVAT credit of 1%/2% CVD paid on imported steam coal was admissible under Rule 3(1)(vii) of the CCR 2004.

2. Whether restrictions contained in Central Excise exemption notifications could be imported into or applied to Customs Notification No. 12/2012-Cus governing the CVD paid on imported steam coal.

3. Whether the Department was entitled to recover the credit under the extended limitation period and impose penalty under Rule 15(2) of the CCR 2004 read with Section 11AC of the Central Excise Act, 1944.

Section 3(1) of the Customs Tariff Act, 1975 levies additional duty of customs, or CVD, which remains a customs duty even though its measure is linked to the excise duty on like goods; Section 3(8) applies the relevant customs exemption provisions to such duty.

Rule 3(1)(vii) of the CCR 2004 expressly permits credit of additional duty leviable under Section 3 of the Customs Tariff Act, without restricting credit where the duty is paid at a concessional rate.

The proviso to Rule 3(1)(i), which restricts credit of excise duty paid under specified Central Excise exemption notifications, applies to excise duty and cannot be extended to CVD paid under an independent Customs notification.

Conditions cannot be implied into an exemption notification, consistent with Hansraj Gordhandas v. H.H. Dave, AIR 1970 SC 755.

The Tribunal also relied on Shyam Steel Industries Ltd., 2022 (382) E.L.T. 329 (Cal.), and its own consistent decisions, including Chettinad Cements & Ramco Cements Ltd. and Seshasayee Paper and Boards Ltd., holding that concessional-rate CVD on imported coal is creditable.

The Tribunal held that the CVD paid by the assessee was additional duty of customs under Section 3 of the Customs Tariff Act and therefore fell within the express language of Rule 3(1)(vii) of the CCR 2004.

Although the Department argued that the concessional CVD rate corresponded to a concessional Central Excise rate carrying a bar on credit, the Tribunal found that the statutory restriction in Rule 3(1)(i) was specifically confined to excise duty and did not cover CVD.

Customs Notification No. 12/2012-Cus prescribed the applicable CVD rate but contained no condition prohibiting availment of CENVAT credit; consequently, the Department could not import conditions from Central Excise notifications into the Customs notification.

Following the consistent view of coordinate Benches and the Calcutta High Court, the Tribunal found the denial of credit legally unsustainable.

Since the substantive demand itself failed, the consequential liability for interest, extended-period recovery and penalty also could not survive.

Restrictions applicable to excise duty under Central Excise exemption notifications could not be superimposed upon CVD paid under the Customs notification.

The Department’s appeal was rejected, the Commissioner (Appeals)’s order allowing the assessee’s appeal was sustained, and the proceedings were disposed of along with the assessee’s cross-objections.