2007 (5) TMI 434 - AT - Central Excise

Cenvat/Modvat - whether the credit of basic duty earned by the appellants can be utilized for payment of NCCD on the final product? Held that - There is a restriction under Rule 3(7) of the Cenvat Credit Rules, 2004, which applies to the credit of various duties, such as additional duties on textiles and textile articles, NCCD, Educational Cess, etc. In terms of this restriction, which overrides the provisions of Rule 3(4), the credit of the named of duties can only be utilized for payment of the said duties alone. As a result, the credit of NCCD can be utilized for only paying of NCCD and not other kind of duties - In the present case, there is no dispute in this regard, since the appellants have utilized the credit of NCCD for paying NCCD only. By no stretch of imagination, this restriction can be extended to credit of duties not specifically listed under Rule 3(7). In the absence of any restriction and as provided under Rule 3(4) of the Cenvat Credit Rules, 2004, the credit of basic excise duty can be utilized for payment of any duty of excise and since the Commissioner herself has held that NCCD is a duty of excise, there can be no objection to the appellants utilizing the credit of basic duty for payment of NCCD - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the credit of basic duty earned by the appellants can be used for payment of NCCD on the final product.
2. Interpretation of Notification No. 32/99 regarding refund of duty paid in cash through PLA.
3. Disallowance of utilization of basic duty credit for payment of NCCD by the adjudicating Commissioner.

Analysis:
1. The Tribunal considered whether the credit of basic duty earned by the appellants could be utilized for payment of NCCD on the final product. The Tribunal noted that the issue at hand was distinct from a decision of the Bangalore Bench and allowed the modification of the stay order. The appellants had not paid NCCD by cash and were not seeking any refund under Notification No. 32/99. The Tribunal found that under Rule 3(4) of the Cenvat Credit Rules, 2004, Cenvat credit could be used for payment of any duty of excise on the final product. As NCCD was considered a duty of excise, the credit of basic duty of excise had to be allowed for payment of NCCD.

2. The Tribunal addressed the interpretation of Notification No. 32/99, applicable to goods manufactured in the North Eastern Region, allowing a refund of duty paid in cash through PLA. The appellants clarified that they had not paid NCCD by cash and were not seeking any refund under this notification. Therefore, the appeal did not involve the interpretation of Notification No. 32/99.

3. The Tribunal examined the disallowance of utilizing the credit of basic excise duty for payment of NCCD by the adjudicating Commissioner. It was clarified that the appellants had partly paid NCCD on the final product by utilizing the credit of NCCD paid on the inputs and the remaining part by using the credit of basic excise duty. The Tribunal referred to Rule 3(7) of the Cenvat Credit Rules, 2004, which restricts the utilization of credit for specific duties. However, this restriction did not apply to the credit of basic excise duty, which could be used for payment of any duty of excise. Therefore, the Tribunal set aside the impugned order and allowed the appeal, granting consequential benefit to the appellants.