2011 (9) TMI 292 - AT - Central Excise

Rule 8(3A) of the Central Excise Rules, 2002 - withdrawn of monthly payment facility - defaulted in making monthly payment of duty for a period more than 30 days - appellant had taken and utilized CENVAT credit - appellants availed credit suo motu - appellant is facing grave financial hardship - Held that assessee to make a pre-deposit of Rs. 25% of the CENVAT credit amount within a period of eight weeks and report compliance within two weeks - set aside the impugned order and remand the case back to the lower appellate authority - Appeal and Stay disposed off.

Summary

Issues:
Default in monthly duty payment, withdrawal of monthly payment facility, utilization of CENVAT credit, show-cause notice for recovery, penalty imposition, non-compliance with pre-deposit directive, entitlement to CENVAT credit, financial difficulties causing non-compliance.

Analysis:
The appellant, a plywood manufacturer, defaulted in duty payment for a specific period, leading to the withdrawal of the monthly payment facility. Despite paying the due amount with interest, they faced penalties and demands for utilizing CENVAT credit during the default period. The appellant then took CENVAT credit suo motu, prompting a show-cause notice for recovery under relevant rules. The Commissioner (Appeals) confirmed demands and imposed penalties. The appellant's non-compliance with a pre-deposit directive resulted in appeal dismissal for failing to meet conditions set by the stay order.

The appellant argued that their entitlement to CENVAT credit justified the suo motu action, asserting no loss to revenue. They cited financial difficulties hindering compliance with the pre-deposit directive. The revenue authority contended that taking suo motu credit during pending appeals contravened the law, emphasizing the need for competent authority approval in disputed credit cases.

The Tribunal acknowledged the legal stance that assessees cannot claim CENVAT credit suo motu without competent authority approval. Despite the financial hardship faced by the appellant, the Tribunal directed a partial pre-deposit of the CENVAT credit amount within a specified timeframe. Upon compliance, the balance due recovery was stayed. The Tribunal set aside the appeal dismissal due to non-compliance, remanding the case for a merit-based decision after providing the appellant with a fair opportunity to present their case.

In conclusion, the Tribunal's decision balanced the appellant's financial challenges with legal requirements, emphasizing compliance with pre-deposit directives and the need for competent authority approval for CENVAT credit claims. The case was remanded for a fresh decision on merits, ensuring procedural fairness and adherence to legal principles.