2006 (6) TMI 317 - AT - Central Excise

Summary

Issues:
Challenge to order confirming demand under Cenvat Credit Rules, 2002 with penalty.

Analysis:
The appellant contested the order of the Commissioner (Appeals) upholding the demand confirmation under Rule 12 of Cenvat Credit Rules, 2002, along with the imposition of a penalty. The demand of Rs. 3,09,783/- was confirmed under Rule 12 read with Section 11A of the Central Excise Act, 1944. Additionally, a penalty of Rs. 25,000/- was imposed under Rule 13 of Cenvat Credit Rules. The appellant was directed to adjust Rs. 13,347/- from the amount in the Cenvat Account on 31-3-2004.

Analysis:
Upon scrutinizing the ER-3 Return for the quarter ending 30th June, 2004, it was observed that the appellant had chosen to operate under Notification No. 8/2003-C.E. dated 1-3-2003 but failed to reverse the Cenvat credit on inputs lying in work in process, final products, and in stock as of 31-3-2004. Consequently, the appellant was asked to deposit the necessary Cenvat amount, which was not reversed, leading to the issuance of a show cause notice.

Analysis:
The lower authorities determined that the appellant had opted for value-based exemption under Notification No. 8/2003 but did not reverse the Cenvat credit as required by Rule 9(2) of the Cenvat Credit Rules. The appellant's argument, citing Rule 3(2) to support their position, was considered. However, the mandatory nature of Rule 9(2) was emphasized, requiring a manufacturer opting for exemption to pay an amount equivalent to the CENVAT amount.

Analysis:
The appellant's counsel contended that the balance sheet should not be relied upon by the Revenue. The Tribunal disagreed, stating that the balance sheet is a crucial document affecting the assessee's liability, thus justifying its consideration.

Analysis:
Regarding the obligation to repay the CENVAT credit as per Rule 9(2), the Tribunal clarified that Illustration No. 2 of Notification No. 9/2003-CE did not limit the operation of Rule 9(2) and was not intended to do so. The Tribunal directed an interim stay of the impugned order upon the appellant depositing 50% of the duty amount within eight weeks, with a waiver of pre-deposit for the remaining amount during the appeal's pendency.

This judgment delves into the complexities of Cenvat Credit Rules, 2002, emphasizing the importance of compliance with reversal requirements when opting for exemptions. The Tribunal's decision underscores the significance of statutory provisions and the relevance of financial documents in determining liability.