Kiran Raj

The Delhi High Court Division Bench comprising Justice Prathiba M. Singh and Justice Dharmesh Sharma, issued a judgment on March 12, 2025, concerning a petition challenging the rejection of a CENVAT Credit claim under the Export Promotion Capital Goods (EPCG) scheme. The petition, filed under Article 226 of the Constitution of India, was dismissed, and the court upheld the order of the Customs, Central Excise & Service Tax Settlement Commission, which denied the claim based on statutory time limitations.

The petitioner, Janki Newsprint Ltd., is engaged in manufacturing and selling craft paper. The company, established in 2000, began its manufacturing operations in 2002. Initially producing writing and printing paper as well as newsprint, the company shifted its focus to craft paper production in 2014-15. To support its operations, the petitioner imported capital goods, including plant and machinery, between 2004 and 2007 under the EPCG Scheme at a concessional customs duty rate of 5%, as per Notification No. 97/2004-Cus, dated September 17, 2004.

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The petitioner obtained nine EPCG authorizations, which allowed the import of capital goods at a concessional rate, subject to the fulfillment of export obligations within eight years, extendable by two years. The petitioner met its export obligations for five authorizations but failed to do so for four.

Due to the non-fulfillment of these obligations, the Directorate of Revenue Intelligence (DRI) initiated an investigation, leading to the issuance of a Show Cause Notice (SCN) on February 28, 2018. The SCN sought:

• Confiscation of the imported capital goods under Section 111(o) of the Customs Act, 1962.

• Recovery of differential customs duty amounting to Rs. 49,43,666 and Rs. 31,71,143 for imports made through Nhava Sheva and Air Cargo Delhi, respectively, along with interest and penalties.

Following the SCN, the petitioner approached the Customs, Central Excise & Service Tax Settlement Commission under Section 127B of the Customs Act, 1962, to settle the case. In its application, the petitioner admitted liability and offered to pay Rs. 31,71,143 in differential duty and Rs. 50,29,597 in interest. Additionally, the petitioner sought to avail CENVAT Credit for the Countervailing Duty (CVD) paid on the imported capital goods. The Settlement Commission, in its final order dated January 23, 2019, accepted the duty and interest payments but denied the CENVAT Credit claim, citing that it was time-barred under Rule 4(1) of the CENVAT Credit Rules, 2004.

The Delhi High Court examined the Settlement Commission’s findings and examined Rule 4(1) of the CENVAT Credit Rules, 2004, which was amended by Notification No. 21/2014-Central Excise (N.T.) dated July 11, 2014. This provision imposes a one-year limitation period for availing credit. The court recorded, "The Bench finds that applicants' claim of credit of CVD on 15.10.2018 i.e., on date of filing the Settlement Application for the period 2004-2007 was barred by time."

The court referred to the Supreme Court's decision in Osram Surya (P) Ltd. v. Commissioner of Central Excise, Indore, which examined statutory time limits and their effect on vested rights. The court also considered Supreme Petrochem Ltd. v. Commr. of Central Tax & C. Ex., Chennai, 2019 (28) G.S.T.L. 564 (Mad.), where it was held that credit could not be claimed retrospectively when duty payment resulted from an investigation rather than voluntary compliance.

The court recorded, "Had the investigations not been initiated against the DRI, this fraud would not have been detected. In view of above, the Bench finds that applicant is liable to penal action under the provisions invoked in the show cause notice."

The petitioner argued that Rule 4(2) of the CENVAT Credit Rules, 2004, should apply, allowing full credit on capital goods in the year of duty payment. However, the court noted that the claim had been filed long after the amendment introducing the one-year limitation period and referred to Global Ceramics Pvt. Ltd. v. The Principal Commissioner of Central Excise, Delhi -1. The court recorded that claims filed after the amendment took effect were subject to the prescribed limitation period.

The petitioner’s request for CENVAT Credit was examined in the context of Rule 4(1) of the CENVAT Credit Rules, 2004, which imposes a time limit for claiming credit. The court noted the Settlement Commission’s reasoning, "As regard the claim of CENVAT credit of CVD for the period 2004-2007 which the applicant claimed now at the time of filing Settlement Application on 15.10.2018, the Bench finds that there was restriction of 1 year under Rule 4(1) of Cenvat Credit Rules, 2002, which states that ‘the manufacturer or provider of output service shall not take Cenvat Credit after one year of the date of issue of any of the documents specified in sub rule (1) of Rule 9.’"

The court found that the time restriction was applicable and relied on Osram Surya (P) Ltd. in determining that the vested right to claim credit was not affected, but the period within which it could be availed was regulated.

The court recorded that the Settlement Commission had considered the settlement application and accepted the payment of differential duty and interest related to the import of capital goods. The Settlement Commission did not order the confiscation of the imported goods but imposed a penalty of Rs. 4,00,000. It also granted immunity from prosecution under Section 127H of the Customs Act, 1962. However, the request for CENVAT Credit for the CVD paid on the imported goods was denied.

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The court referred to the Settlement Commission's reasoning:

"The Bench finds that applicants claim of credit of CVD on 15.10.2018 i.e on date of filing the Settlement Application for the period 2004-2007 was barred by time. The Bench finds that vested rights of applicant for availing credit of CVD remained, what was restricted was time for availing such credit and relies upon case law of Hon'ble Supreme Court in case of Osram Surya (P) Ltd. V/s. CCE, Indore - 2002-TIOL-64-SC-CX."

The court concluded, "In the opinion of this Court, the Settlement Commission’s order does not warrant any interference." It dismissed the petition, stating, "The petition is accordingly dismissed. Pending applications, if any, are also disposed of."

Advocates Representing the Parties

For the Petitioner: Mr. Pradeep Jain, Mr. Sambhav Jain, Advocates

For the Respondent (CBIC): Mr. Akshay Amritanshu (Senior Standing Counsel), Ms. Drishti Saraf, Ms. Pragya Upadhyay, Advocates

Case Title: Janki Newsprint Ltd. v. Principal Commissioner of Customs, New Customs House, Air Cargo IGI Airport, New Delhi

Neutral Citation: 2025: DHC:1591-DB

Case Number: W.P.(C) 1919/2020

Bench: Justice Prathiba M. Singh, Justice Dharmesh Sharma

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