2014 (6) TMI 893 - AT - Central Excise

Waiver of pre deposit - Exemption under Notification No. 63/95-C.E. - coal supplier under the mistaken belief that duty on coal has been imposed started paying duty after duly intimating the Central Excise Department and the appellants being buyers of the coal (as an input) took Cenvat credit of duty so paid - Held that - Exemption is subject to condition and therefore prima facie it is not mandatory for the coal supplier to avail of it. Consequently the very basis for denying the Cenvat credit holding that the coal supplier was mandatorily required to avail of the exemption under the said Notification is fatally hit. Further the judgments cited above also clearly support the appellant s case. - it is evident that the appellants have been able to make out a strong case for waiver for pre-deposit of the remaining amount. Accordingly, the stay application is allowed, the pre-deposit of the remaining amount and interest is waived under Section 35F of the C. Ex. Act, 1944 and the recovery stayed till the deposal of the appeal - Stay granted.

Issues involved:
1. Disallowance of Cenvat credit on duty paid for coal
2. Interpretation of exemption Notification No. 63/95-C.E.
3. Applicability of Cenvat credit rules
4. Request for waiver of pre-deposit and stay on recovery

Issue 1: Disallowance of Cenvat credit on duty paid for coal
The case involves a dispute over the disallowance of Cenvat credit amounting to &8377; 19,74,118/- on duty paid for coal purchased by the appellants. The Order-in-Appeal upheld the disallowance citing that the coal supplier did not have the option to pay duty as per Section 5A(1A) of the Central Excise Act. The Board's Circular also clarified that such payments cannot be considered as duty of excise. The appellants argued that the exemption Notification No. 63/95-C.E. was conditional, and Cenvat credit should be allowed for duty actually paid. They relied on various judgments supporting their stance, emphasizing that Cenvat credit rules allow credit for duty paid on inputs. Ultimately, the Tribunal found in favor of the appellants, noting that the exemption was subject to conditions, and the coal supplier was not mandated to avail it, thereby allowing the Cenvat credit and waiving the remaining pre-deposit.

Issue 2: Interpretation of exemption Notification No. 63/95-C.E.
The Tribunal analyzed Notification No. 63/95-C.E., which exempted goods, including coal manufactured in a mine, subject to specified conditions. The Tribunal observed that the exemption was not mandatory for the coal supplier to avail, as it was subject to conditions. This analysis formed the basis for overturning the disallowance of Cenvat credit, as the mandatory requirement for the coal supplier to avail of the exemption was deemed invalid. The Tribunal's interpretation of the exemption played a crucial role in deciding in favor of the appellants.

Issue 3: Applicability of Cenvat credit rules
The appellants argued that Cenvat credit should be allowed for duty actually paid, citing precedents such as Hi-Tech Syringes (P) Ltd. v. CCE and Cipla Ltd. v. Commissioner of Customs & C. Ex. The Tribunal considered these judgments, which highlighted that the Cenvat Credit Rules allow credit for duty 'paid' on inputs, not just duty payable. By emphasizing the distinction between duty paid and duty payable, the appellants successfully made a case for the applicability of Cenvat credit rules in their situation, leading to the Tribunal's decision to waive the remaining pre-deposit and stay on recovery.

Issue 4: Request for waiver of pre-deposit and stay on recovery
The appellants had already deposited &8377; 10 lakhs and sought a waiver of the remaining pre-deposit amount. They requested a stay on recovery pending the appeal's disposal. The Tribunal, after considering the facts and submissions, acknowledged the appellants' strong case for waiver of the remaining amount. Consequently, the Tribunal allowed the stay application, waived the pre-deposit of the remaining amount and interest under Section 35F of the C. Ex. Act, 1944, and stayed the recovery until the appeal's final decision.

This detailed analysis of the judgment in the Appellate Tribunal CESTAT NEW DELHI case provides insights into the legal issues surrounding the disallowance of Cenvat credit, interpretation of exemption notifications, the applicability of Cenvat credit rules, and the decision on waiver of pre-deposit and stay on recovery.

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