2016 (1) TMI 1151 - AT - Central Excise

Transitional provision - Cenvat credit - Demand - Rule 11(1) of the Cenvat Credit Rules, 2004 - Notification 23/2004-CE - Penalty - Held that - the service tax credit of ₹ 32,820/- which was lying unutilized in their cenvat account, as per Rule 11(1) of the Cenvat Credit Rules, 2004 as also Notification No.23/2004-CE, they are allowed to utilize the same and accordingly the appellant has utilized the same in accordance with these rules and there is no illegality in the availment of cenvat credit lying unutilized in their account before 10.9.2004 - Appeal allowed.

Summary

Issues:
1. Interpretation of Rule 11(1) of the Cenvat Credit Rules, 2004 and Notification No.23/2004-CE regarding utilization of unutilized credit.
2. Imposition of penalty under Section 11AC of the Central Excise Act for dispute involving interpretation of notification.

Analysis:
1. The appeal revolved around the appellant, engaged in the manufacture of encapsulation machinery parts, utilizing unutilized service tax credit of Rs. 32,820 as per Rule 11(1) of the Cenvat Credit Rules, 2004 and Notification No.23/2004-CE. The appellant claimed they informed the range Superintendent and utilized the credit post 10.9.2004 for service tax payment. The Commissioner (Appeals) upheld the demand, leading to the present appeal.

2. The appellant's counsel argued that as a service provider since 31.5.2002, they were entitled to utilize the credit under the mentioned rules. They contended that penalty under Section 11AC of the Central Excise Act was unjust due to a dispute over notification interpretation. The Assistant Commissioner's decision was challenged based on this interpretation discrepancy.

3. The Tribunal analyzed Rule 11(1) which allowed unutilized credit earned before 10.9.2004 to be utilized in accordance with the rules. The appellant's case fell within this provision, permitting the utilization of Rs. 32,820 credit. The Tribunal concluded that the appellant correctly availed the credit, overturning the impugned order and allowing the appeal with any consequential relief.

4. The judgment highlighted the transitional provision in Rule 11, emphasizing the appellant's entitlement to utilize the unutilized credit. The Tribunal's decision was based on a strict interpretation of the rules and notification, ultimately ruling in favor of the appellant's right to utilize the credit as per the specified provisions.

5. In conclusion, the Tribunal's decision centered on the correct application of Rule 11(1) of the Cenvat Credit Rules, 2004 and Notification No.23/2004-CE, affirming the appellant's right to utilize the unutilized credit. The judgment provided clarity on the interpretation of the rules and upheld the appellant's claim, setting aside the previous order and allowing the appeal.