2007 (4) TMI 528 - AT - Central Excise

Issues Involved:
1. Utilization of AED credit on RTCWS for payment of duty on tyres.
2. Classification of RTCWS and its impact on AED applicability.
3. Amendment of CENVAT Credit Rules and its retrospective application.
4. Recovery of irregularly availed CENVAT credit of AED.
5. Finality and binding nature of Deputy Commissioner's order.

Detailed Analysis:

1. Utilization of AED credit on RTCWS for payment of duty on tyres:
The department appealed against the order allowing the respondents to utilize the credit of Additional Excise Duty (AED) paid on Rubberised Tyre Cord Warp Sheet (RTCWS) for payment of duty on tyres during the period 16-3-1995 to 1-6-1998. The respondents, manufacturers of tyres, could not utilize AED credit on RTCWS for payment of any other kind of excise duty on final products during this period.

2. Classification of RTCWS and its impact on AED applicability:
The classification of RTCWS was disputed but settled by the apex court in Commissioner of Central Excise, Goa and Chennai v. M.R.F. Ltd., where RTCWS was classified under CH 59.06, exempting it from AED under the Additional Excise Duties (Goods of Special Importance) Act, 1957. This classification impacted the respondents' ability to utilize AED credit on RTCWS for payment of duty on tyres.

3. Amendment of CENVAT Credit Rules and its retrospective application:
In 2003, the CENVAT Credit Rules were amended to allow the utilization of AED (GSI) credit on input for payment of Cenvat duty on final products, but only for credit accrued prior to 1-3-2003. The 2004 Budget further restricted this to AED (GSI) paid on input on or after 1-4-2000. Consequently, the respondents could not utilize credit of AED (GSI) paid on input prior to 1-4-2000 for payment of any duty on tyres cleared after 1-3-2003.

4. Recovery of irregularly availed CENVAT credit of AED:
The Finance Act, 2005 amended Section 88 of the Finance (No. 2) Act 2004 to provide for recovery of any AED (GSI) accumulated prior to 1-4-2000. The original authority demanded Rs. 8,99,99,526/- from the respondents, which was determined to be the total amount of AED (GSI) irregularly taken as CENVAT credit on inputs. The Commissioner (Appeals) annulled the credits and debits of 27-3-2000 but maintained the accumulated credit of Rs. 5,78,37,250/- as the opening balance as of 27-3-2000.

5. Finality and binding nature of Deputy Commissioner's order:
The Deputy Commissioner, acting in a quasi-judicial capacity, quantified the respondents' liability at Rs. 7,25,70,243/- and asked for payment in 36 EMIs. Both the Revenue and the respondents accepted this decision, and the respondents have been paying the EMIs. The Tribunal found that the Deputy Commissioner's order had attained finality and was binding on both sides. The Joint Commissioner's report, which conflicted with the Deputy Commissioner's order, was rejected.

Conclusion:
The appeal by the Revenue was dismissed as the dispute had been settled under Section 88 of the Finance (No. 2) Act, 2004, as amended by the Finance Act, 2005. The Deputy Commissioner's order was final and binding, rendering the decisions of the lower appellate authority and the Revenue's challenge irrelevant.

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