CESTAT Allows Credit Of CVD And SAD Paid For Imports Made Prior To The GST Regime

The Chennai Bench of CESTAT has allowed credit of CVD and SAD paid after 30.06.2017 for the imports made prior to 30.06.2017, i.e., prior to the GST regime, under the advance authorisation scheme. The Single Bench of Judicial Member Ms. Sulekha Beevi held that credit of CVD and SAD paid by the importer could not be denied on the ground that the duties were paid by the appellant only after an intimation letter was issued to it. The CESTAT observed that the said intimation letter had not been issued by invoking any provisions of the Customs law or Excise law. The appellant M/s. ITCO Industries Ltd. imported raw materials without payment of duty against the advance authorizations issued to it by the Additional Directorate General of Foreign Trade, Bengaluru. A deficiency letter was issued to the appellant directing it to regularize the excess import of inputs made by it. A demand notice was also issued to the appellant for non-fulfilment of export obligations under the advance authorizations issued to it. Consequently, the appellant paid Customs Duties along with Countervailing Duty (CVD) and Special Additional Duty (SAD) with applicable interest, vide the T.R. Challan. Thereafter, the GST regime was introduced with effect from 01.07.2017, and the appellant was unable to avail input credit of the CVD and SAD paid by it. Since, the appellant could not transfer the credit by way of TRAN-1 as the TRAN-1 proceedings had lapsed on 27.12.2017, the appellant filed refund claims under Section 11B of the Central Excise Act, 1944 within one year from the date of payment of the duties. The original authority rejected the refund claims of the appellant holding that the appellant was not eligible for refund of the CVD and SAD paid by it. Against this, the appellant filed an appeal before the Commissioner (Appeals), who upheld the order of the original authority. Hence, the appellant filed an appeal before the CESTAT. The appellant M/s. ITCO Industries submitted before the CESTAT that Rule 3 of the CENVAT Credit Rules, 2004 allows a manufacturer to avail credit of the Additional Duties of CVD and SAD paid by it under Section 3 of Customs Tariff Act, 1975. Therefore, the appellant averred that it was eligible to get credit of the said CVD and SAD. The appellant added that due to the introduction of the new GST law, the appellant could not avail credit in CENVAT account and the appellant also could not transfer the credit by way of TRAN-1. The appellant contended that the revenue department had denied the refund to the appellant only on the ground that a demand notice had been issued to the appellant. The appellant added that the relevant notice issued to appellant was merely an intimation letter to pay the duty and that it was not a demand or recovery notice issued under Section 142 of the Customs Act, 1962. The appellant averred that in the said notice, there was no allegation of any fraud or wilful misstatement. The appellant added that in view of Rule 9 (1) (b) of the CENVAT Credit Rules, 2004, credit can be denied only if there is a finding of fraud, collusion, wilful misstatement or suppression of facts with the intent to evade payment of duty. The appellant contended that there was no such finding rendered against the appellant. The appellant averred that credit cannot be denied merely because an intimation was given by the revenue department to the appellant to pay duty. The appellant added that Section 142 (3) of GST Act, 2017 provides that every refund claim has to be processed under the existing law and has to be allowed in cash. The CESTAT observed that the revenue department had rejected the refund claims of the appellant by invoking Rule 9 (1) (b) of the CENVAT Credit Rules, 2004, by holding that since the appellant had paid the duties only after a demand notice was issued to it, hence, the appellant was not eligible for credit. The CESTAT ruled that the alleged demand notice was merely in the nature of an intimation letter and that it had not been issued by invoking any provisions of the Customs law or Excise law. The CESTAT added that there was no allegation of any fraud, collusion or suppression of facts with intent to evade payment of duty in the said intimation letter. The CESTAT ruled that there was no evidence placed before it to establish that the duties were paid by the appellant after adjudication and after rendering a finding of fraud, collusion or suppression of fact by the appellant with the intent to evade payment of duty. Thus, the CESTAT held that the appellant was eligible for credit of CVD and SAD paid by it and that credit could not be denied to the appellant. The CESTAT observed that the Delhi Bench of the CESTAT in the case of M/s. Mithila Drugs Pvt. Ltd. versus Commissioner, Central Goods and Respondent Service Tax (2022) had observed that the importer had paid CVD and SAD during the GST ...

CESTAT Allows Credit Of CVD And SAD Paid For Imports Made Prior To The GST Regime

Parina Katyal

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