CESTAT Allows CENVAT Credit on Concessional CVD Paid on Imported Coal; Quashes ₹3.63 Crore Demand Against India Cements

April 17, 2026 : The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a demand of ₹3.63 crore raised against The India Cements Ltd., holding that CENVAT credit cannot be denied merely because Countervailing Duty (CVD) on imported coal was paid at concessional rates.

The Bench comprising Judicial Member Ajayan T.V. and Technical Member Vasa Seshagiri Rao, in its Final Order dated April 17, 2026, also quashed the interest and penalty imposed in the impugned order.

Background

The appeal arose from an Order-in-Original dated December 14, 2017 passed by the Commissioner of GST and Central Excise, Tiruchirappalli, confirming a demand of ₹3,63,85,392 along with interest and penalty of ₹2,42,57,680 for the period September 2012 to June 2017.

The dispute concerned the admissibility of CENVAT credit on CVD paid at concessional rates of 1% and 2% on imported steam coal under Notification No. 12/2012-Cus.

Core Issue

The Revenue contended that concessional CVD was not “equivalent to duty of excise” under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004, and therefore credit was inadmissible.

Rejecting this argument, the Tribunal clarified that CVD is an “additional duty of customs” levied under Section 3(1) of the Customs Tariff Act, 1975. It held that although the duty is quantified with reference to excise duty, its nature remains that of customs duty.

The Bench emphasised that the phrase “equivalent to duty of excise” refers to the measure of levy and not its intrinsic character. Consequently, the rate at which duty is paid does not determine eligibility for credit.

Key Findings

• Rule 3(1)(vii) permits credit of additional duty of customs without requiring payment at the tariff rate.
• CVD and “additional duty of customs” are interchangeable expressions referring to the same levy.
• Reading a restriction based on concessional rate into the rule would amount to impermissible judicial legislation.
• Eligibility to credit depends on the nature of the levy, not the quantum of duty paid.

The Tribunal also relied on consistent precedents holding that concessional duty does not alter the character of the levy for CENVAT purposes.

Limitation and Penalty

On limitation, the Tribunal found the issue to be interpretational. It noted that all relevant facts were disclosed in statutory returns and there was no suppression or intent to evade duty.

Relying on settled principles, the Bench held that a mere difference in interpretation cannot justify invocation of the extended period. It categorically observed that the Department failed to establish any element of fraud or suppression.

Accordingly:

• Extended period of limitation was held not invocable
• Penalty was set aside
• Interest liability was also quashed as consequential

Conclusion

Holding the demand unsustainable both on merits and limitation, the Tribunal set aside the impugned order in entirety and allowed the appeal with consequential relief.

Case Title: The India Cements Ltd. v. Commissioner of GST and Central Excise
Case No.: Excise Appeal No. 41125 of 2018