2006 (9) TMI 433 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery for an amount of Rs. 1.43 crores.
2. Appropriation of refund amount towards the demand.
3. Invocation of Rule 57CC or Rule 57AD.
4. Nature of demand under Rule 57AH of Central Excise Rules, 1944/Rule 12 of Cenvat Credit Rules, 2001/02.
5. Validity of appropriation without legal sanction.

Analysis:

1. The application sought waiver of pre-deposit and stay of recovery for an amount of Rs. 1.43 crores quantified by the Asst. Commissioner following the order of the Commissioner (Appeals). The party claimed that a refund amount of Rs. 40 lakhs previously allowed by the same authority was utilized towards the current demand. The counsel cited decisions from co-ordinate benches to argue against invoking Rule 57CC or Rule 57AD for recovery.

2. The original authority's order indicated utilization of over Rs. 1.75 crores from the Cenvat account for payment related to exempted goods cleared to Indian Railways. However, the demand was made under Rule 57AH of the Central Excise Rules, 1944/Rule 12 of Cenvat Credit Rules, 2001/02, different from cases cited by the counsel. The Asst. Commissioner's appropriation of the Rs. 40 lakhs refund towards the Rs. 1.43 crores demand was questioned, as it lacked legal sanction.

3. The learned SDR clarified that Rule 57CC or Rule 57AD was not invoked in the subject Show Cause Notice (SCN), which was confirmed by the records. Despite the utilization of funds from the Cenvat account, the demand was made under a different rule, raising questions about the appropriateness of the demand and the Asst. Commissioner's actions.

4. The judgment highlighted the distinction in the nature of the demand made under Rule 57AH of the Central Excise Rules, 1944/Rule 12 of Cenvat Credit Rules, 2001/02 compared to previous cases. The Tribunal considered the appropriateness of the demand and the validity of the Asst. Commissioner's decision to appropriate the refund amount towards the new demand.

5. The Tribunal held that the appropriation of the refund amount without legal sanction was not permissible. It was determined that the department could retain the amount until the final disposal of the appeal, in compliance with Section 35F of the Central Excise Act. Consequently, waiver of pre-deposit and stay of recovery was granted for the remaining balance amount pending the appeal's outcome.