2006 (1) TMI 486 - AT - Central Excise

Summary

Issues: Waiver and pre-deposit requirements, interpretation of Rule 6 of CENVAT Credit Rules, enforcement of option by the Revenue officers, liability to penalty.

Waiver and pre-deposit requirements:
The appeal was made for waiver and pre-deposit requirements, and stay of recovery thereof. The appellants, who are manufacturers availing Modvat credit and clearing goods at full exempted rates of duty, were asked to pay 8% of the amount of the price of the exempted goods as per Rule 6(2) of CENVAT Credit Rules. After hearing the application, it was found that the main appeal could be disposed of. Therefore, after the waiver of pre-deposit, the appeal was taken up for disposal with the consent of both sides.

Interpretation of Rule 6 of CENVAT Credit Rules:
The Board's instruction clarified that Rule 6 of CENVAT Credit Rules, 2001 is not meant for manufacturers availing full exemption under notification for the Small Scale Industries (SSI) sector. However, if a manufacturer availing SSI duty exemption uses cenvatable inputs to manufacture exempted goods, the option rests with the manufacturer to either reverse the credit on the inputs used or pay duty on the finished goods. The emphasized portion of the instruction indicated that the choice lies with the assessee. In the case at hand, the assessee had opted to reverse the entire amount of credit. The Tribunal emphasized that such an option cannot be enforced or directed by the Revenue officers. The department cannot alter the option by directing 8% recovery, as it was done in the impugned order. The Tribunal set aside the order and remitted the matter back to the original authority to re-determine the amounts required to be reversed and enforce such reversal before determining the liability to penalty.

Enforcement of option by the Revenue officers:
The Tribunal held that the department cannot change or alter the option chosen by the assessee, in this case, to reverse the entire amount of credit. The Revenue officers cannot enforce or direct the assessee to pay 8% recovery based on their own grounds. The Tribunal emphasized that the option of whether to reverse the credit or pay duty after the payment of 8% as per Rule 6(2) is solely with the assessee and cannot be dictated by the Revenue officers.

Liability to penalty:
The issue of liability to penalty was to be determined only after the quantum of reversals required was established. The Tribunal directed that the amounts to be reversed should be re-determined by the original authority, and the enforcement of such reversal should take place before deciding on the liability to penalty. The appeal was allowed in the mentioned terms, emphasizing the importance of following the correct procedures and respecting the choices made by the assessee in such matters.