The Commissioner Of Service Tax vs. The Tamil Nadu Newsprint And Papers Limited

Facts

The Commissioner of Service Tax, Central Excise and GST (Petitioner) filed an appeal against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The respondent, Tamil Nadu Newsprint and Papers Limited, manufactured printing and writing paper and imported steam coal for generating steam/electricity used in their manufacturing process. With effect from March 1, 2011, steam coal was levied a central excise duty of 5% ad valorem, with a concessional rate of 1% available under Notification No. 1/2011-CE, subject to the condition that Cenvat credit on inputs or input services was not availed. The respondent paid 2% CVD on imported coal and availed credit for it. The Petitioner contended that this credit was not eligible under Rule 3 of the Cenvat Credit Rules, 2004, leading to a show cause notice, confirmation of demand, interest, and penalty. The CESTAT, in its order dated September 22, 2021, allowed the respondent's appeal, setting aside the Commissioner's order.

Held

The Court held that no substantial question of law was involved in the appeal. The issue was squarely covered by the judgment of the Calcutta High Court in Commissioner of CGST and C. Ex. Bolpur Commissionerate Vs. Shyam Steel Industries Limited, which was relied upon by the respondent. The Tribunal, in its impugned order, correctly noted that there were no restrictions in the relevant customs notifications (dated March 17, 2012, and March 1, 2013) regarding the availment of Cenvat Credit on coal, unlike Serial No. 67 of Central Excise Notification No. 12 of 2012. The Tribunal also held that credit of CVD is available under Rule 3(1)(vii) of the Rules, and the proviso to Rule 3(1)(i) restricting credit in case of coal cleared under Excise Notification No. 12/2012 cannot be implicitly read into when the rate of CVD was not followed from the excise notification but applied generally. The Court agreed with the Tribunal's reasoning that tax statutes require strict interpretation and that the word 'equivalent' allows for some flexibility. The Court also considered the CBEC circular and the minutes of the Regional Advisory Committee meeting, which supported the respondent's claim. Numerous CESTAT and Supreme Court judgments were cited in favor of the respondent, and the Petitioner did not show any reversal or modification of these decisions. Therefore, the grounds raised by the Petitioner did not require reconsideration.

Key Issues

1. Whether the respondent is eligible to avail Cenvat Credit in respect of the 1%/2% concessional Additional Duty of Customs (CVD) paid on imported coal, considering the restrictions in Notification No. 12/2012-CE dated March 17, 2012, and Rule 3 of the Cenvat Credit Rules, 2004? (Question of law) 2. Whether the CESTAT erred in allowing the appeal without appreciating that if credit of excise duty at the concessional rate of 1% is not available under the proviso to Rule 3(1)(i) of the Cenvat Credit Rules, the credit of CVD at the rate of 1%/2% should also be restricted? (Question of law) 3. Whether the restriction prescribed for duty of excise in Notification No. 1/2011 CE and Notification No. 12/2012 C.E. read with Rule 3 of the Cenvat Credit Rules, 2004, is applicable to the countervailing duty? (Question of law) Petitioner's arguments: The respondent was not eligible for Cenvat Credit on imported steam coal under Sub-Rule 1 of Rule 3(1) of the Cenvat Credit Rules, 2004, as credit is not allowed when exemption is taken under Notification No. 12/2012 dated March 17, 2012. Clause-VII of Rule 3, dealing with additional duty leviable under Section 3 of the Customs Tariff Act being equivalent to excise duty, was also cited. The Petitioner argued that the Tribunal failed to consider these provisions. Respondent's arguments: The respondent relied on the judgment of the Calcutta High Court in Commissioner of CGST and C. Ex. Bolpur Commissionerate Vs. Shyam Steel Industries Limited, which squarely covered the issue. They also referred to the interpretation of the word 'equivalent' in tax statutes, a CBEC circular clarifying CVD, minutes of a Regional Advisory Committee meeting, and several CESTAT and Supreme Court judgments.