2009 (1) TMI 686 - AT - Central Excise

Summary

Issues:
1. Demand of wrongly utilized Cenvat credit and applicable interest under Cenvat Credit Rules, 2002.
2. Imposition of penalty under Rule 13 of the Cenvat Credit Rules, 2002.
3. Interpretation of Notification No. 29/04 and 30/04 regarding concessional rate of duty and exemption for textile yarn.

Analysis:

Issue 1: Demand of wrongly utilized Cenvat credit and applicable interest under Cenvat Credit Rules, 2002.
The impugned order upheld a demand of Rs. 4,81,085/- as wrongly utilized Cenvat credit by M/s. Kave Textile Mills Salem (P) Ltd., along with applicable interest under Rule 12 of the Cenvat Credit Rules, 2002. The applicant had initially opted for Notification No. 30/04, which required forfeiting Cenvat credit balance, but later switched to Notification No. 29/04, which did not have such a condition. The Tribunal found that the applicant did not avail the benefit under Notification No. 30/04 and discharged duty under Notification No. 29/04. Consequently, the demand and penalty were deemed unjustified, leading to a waiver of pre-deposit and stay of recovery pending appeal.

Issue 2: Imposition of penalty under Rule 13 of the Cenvat Credit Rules, 2002.
In addition to the demand of wrongly utilized Cenvat credit, a penalty equal to the amount was imposed on the applicant under Rule 13 of the Cenvat Credit Rules, 2002. However, the Tribunal determined that since the applicant did not avail the benefit under Notification No. 30/04 and complied with Notification No. 29/04, the penalty was not justified. As a result, the penalty was set aside, aligning with the decision regarding the demand of Cenvat credit.

Issue 3: Interpretation of Notification No. 29/04 and 30/04 regarding concessional rate of duty and exemption for textile yarn.
The case involved a detailed analysis of Notification No. 29/04 and 30/04, both dated 9-7-04, which provided concessional rate of duty and full exemption for textile yarn subject to specific conditions. Notification No. 30/04 required forfeiting Cenvat credit balance, while Notification No. 29/04 did not have this condition. The applicant's switch from one notification to the other raised questions about the utilization of Cenvat credit and compliance with the conditions. The Tribunal's interpretation clarified that the applicant's actions aligned with Notification No. 29/04, leading to the conclusion that the demand and penalty under Notification No. 30/04 were unwarranted.

This judgment highlights the importance of strict compliance with notification conditions and the impact of such compliance on the utilization of Cenvat credit and imposition of penalties under the Cenvat Credit Rules, 2002.