2006 (12) TMI 346 - AT - Central Excise

Summary

Issues: Revenue appeal regarding adjustment of interest and penalty from RG 23A Part II Cenvat credit.

Analysis:
1. The main issue in this case is the interpretation of sub-rule (3) of Rule 3 of Cenvat Credit Rules, 2002, concerning the utilization of Cenvat credit for payment of duty, interest, and penalty. The Revenue argued that interest and penalty cannot be adjusted and paid through RG 23A Part II as per the provisions of the rule.

2. The Commissioner had directed the adjustment of interest and penalty from the balance amount in RG 23A Part II. However, the learned DR representing the Revenue contended that this direction was incorrect. The crux of the matter was whether the adjustment of penalty and interest from the credits available under RG 23 Part II was permissible under the Cenvat Credit Rules.

3. Upon careful consideration and examination of the relevant rule, the Tribunal found that only duty and the Cenvat credit taken on inputs could be adjusted from the Cenvat credit amount. The Tribunal concluded that the Commissioner's direction to adjust the penalty and interest amount from the credits available under RG 23 Part II was contrary to the rule. Consequently, the impugned order was modified to allow the appeal, indicating that the adjustment of penalty and interest from the Cenvat credit was not in accordance with the law.

4. The judgment highlights the importance of strict adherence to the provisions of the Cenvat Credit Rules in utilizing Cenvat credit for payment of duty, interest, and penalty. It clarifies that the adjustment of penalty and interest from the Cenvat credit available under RG 23 Part II is not permissible as per the specific provisions of the rule. The decision serves as a precedent for ensuring the correct application of rules governing the utilization of Cenvat credit in similar cases.