2007 (4) TMI 89 - AT - Central Excise

Cenvat credit - Assessee initially opted for availing SSI exemption but later rethought his decision and choosen not the avail exemption - He paid duty accordingly whether cenvat credit is lapsed once SSI option is exercised - Stay granted

Summary

Issues:
Interim stay of recovery of Cenvat credit and penalty under Cenvat Credit Rules, 2004.

Analysis:
The appellant sought an interim stay of the recovery of Cenvat credit and penalty under the Cenvat Credit Rules, 2004. The appellant had initially opted for exemption under Notification No. 8/2003, which provided duty exemption to S.S.I. units up to a certain limit. However, the appellant later paid the duty on removals and the differential duty on dues after exercising the exemption option. The key issue was whether under Rule 11(2), the entire Cenvat credit balance lapses at the time of exercising the exemption option. The Tribunal noted that if the credit lapses, the revenue cannot retain the duty paid post-exemption option exercise and insist on the lapse of the entire Cenvat credit balance. In this case, the appellant had paid Rs. 1,28,400 after opting for exemption. The Tribunal directed this amount to be treated as a pre-deposit and instructed the appellant to deposit an additional Rs. 25,000 within six weeks. Upon compliance, the Tribunal waived the pre-deposit of the remaining duty and penalty amount during the appeal's pendency. Failure to make the required deposit would result in the dismissal of the appeal. The Tribunal scheduled a compliance report for a future date, effectively disposing of the application.

This judgment clarifies the treatment of Cenvat credit balance and duty payments post-exemption option exercise under Rule 11(2) of the Cenvat Credit Rules, 2004. It emphasizes that the revenue cannot retain duty paid after the exemption option exercise while insisting on the lapse of the entire Cenvat credit balance. The Tribunal's decision to treat a specific payment as a pre-deposit and require an additional deposit demonstrates a practical approach to resolving the issue. The waiver of pre-deposit for the remaining duty and penalty amount during the appeal period incentivizes compliance with the deposit requirements. The Tribunal's directive for a compliance report ensures monitoring of the appellant's actions, maintaining accountability in the process. Overall, the judgment provides a balanced resolution by considering the facts and circumstances of the case while upholding the legal framework of the Cenvat Credit Rules, 2004.