2008 (1) TMI 719 - AT - Central Excise

Summary

Issues:
1. Whether the appellant is required to pre-deposit duty amount and penalty for availing Cenvat credit on breakages of glass bottles compensated by dealers.
2. Whether the demands on pro rata Cenvat credit under Rule 12 are legally tenable.
3. Whether compensation received for breakage of glass bottles affects the eligibility of the appellant to avail Cenvat credit.

Analysis:
1. The appellant was asked to pre-deposit duty and penalty for availing Cenvat credit on glass bottles breakages compensated by dealers. Both authorities held that demands on pro rata Cenvat credit under Rule 12 were legally tenable as the bottles were not available for further usage after compensation. The utilization of Cenvat credit was deemed wrongful due to the compensation received.

2. The consultant argued that the appellant was eligible to avail Cenvat credit on broken glasses filled with aerated waters and cleared from the factory, citing precedents where similar claims were upheld. He contended that compensation from dealers should not affect the availment of credit as there is no provision for such recovery in law. The consultant emphasized that the confirmation of demand was unjustified.

3. The JDR defended the order, stating that once compensation for breakage glasses was received from dealers, the appellant was not eligible for credit. However, the tribunal noted that both authorities did not dispute the initial availing of Cenvat credit on broken glasses. The tribunal found no provision justifying the view that utilization of Cenvat credit was wrongful due to subsequent compensation. It highlighted the lack of a one-to-one correlation and the incorrect application of pro rata credit under Rule 12. Consequently, the tribunal allowed the stay application, granting full waiver of pre-deposits and halting recovery until the appeal's pendency.