Case Note & Summary
The petitioner, Steelco Gujarat Limited, a public limited company engaged in manufacturing, obtained a Duty Free Import Authorisation (DFIA) dated 29th October 2009 under the Foreign Trade Policy 2009-2014. The DFIA entitled the petitioner to import inputs duty-free for manufacturing 'cold rolled full hard CRCA' with an obligation to export the specified quantity. During manufacture, the petitioner availed Cenvat credit on consumables used in the final product, as it was uncertain whether the goods would be exported or sold domestically. After exporting the final products under the DFIA, the petitioner reversed the Cenvat credit along with interest. Upon fulfillment of the export obligation, the petitioner applied for transfer of the DFIA, making a statement that Cenvat credit had not been availed on the inputs used in the exported goods, to claim the benefits under paragraph 4.2.6 of the Foreign Trade Policy. However, the Central Board of Excise & Customs (CBEC) issued an office memorandum on 22nd February 2011, stating that if Cenvat credit is availed on inputs used in goods exported under DFIA, it shall be treated as availed even if reversed or paid back with interest after clearance. The petitioner challenged this memorandum. The Court considered whether the reversal of credit with interest after export constitutes 'availment' for the purpose of denying transferability benefits. The Court held that the substantive benefit of Cenvat credit is not retained once reversed with interest, and therefore, the condition in paragraph 4.2.6 is satisfied. The CBEC memorandum was quashed to the extent it treated reversal as availment, and the respondents were directed to process the petitioner's application for transfer of DFIA in accordance with law.
Headnote
A) Customs and Excise - Cenvat Credit - Duty Free Import Authorisation (DFIA) - Paragraph 4.2.6 of Foreign Trade Policy 2009-2014 - The issue was whether reversal of Cenvat credit with interest after export of goods under DFIA constitutes 'availment' of credit, disentitling the exporter to transferability benefits. The Court held that once the credit is reversed with interest before clearance of the export goods, it cannot be said that the credit has been availed, as the substantive benefit of credit is not retained. The CBEC office memorandum dated 22nd February 2011 was quashed to the extent it treated reversal as availment. (Paras 4-10) B) Customs and Excise - Cenvat Credit - Reversal with Interest - The Court reasoned that the purpose of the condition in paragraph 4.2.6 is to ensure that the exporter does not avail both the duty-free import benefit and Cenvat credit. Since the petitioner reversed the credit with interest, the condition was satisfied, and the transferability benefit could not be denied. (Paras 7-9)
Issue of Consideration
Whether the reversal of Cenvat credit with interest after export of goods under DFIA can be treated as 'availment' of credit for the purpose of denying transferability benefits under paragraph 4.2.6 of the Foreign Trade Policy 2009-2014.
Final Decision
The Court quashed the office memorandum dated 22nd February 2011 to the extent it held that reversal of Cenvat credit with interest after clearance of goods under DFIA constitutes availment of credit. The respondents were directed to process the petitioner's application for transfer of DFIA in accordance with law, without treating the reversal as availment.
Law Points
- Cenvat credit reversal
- Duty Free Import Authorisation (DFIA)
- Foreign Trade Policy 2009-2014
- paragraph 4.2.6
- CBEC office memorandum
- interpretation of 'availed'
- export obligation
- substantive benefit
