2011 (11) TMI 335 - AT - Central Excise

Stay - Dis-allowance of differential Cenvat credit on the ground that suppliers of the inputs have paid excess duty at the rate of 16% ad valoram instead of the applicable rate of duty of 14% ad valoram Held that - Rule 3(I)(i) of Cenvat Credit Rules, 2004 provides that credit of duty allowed to be taken by the recipient of the inputs is equivalent to the duty of excise specified in the schedule to the Central Excise Tariff. Inasmuch as duty required to be paid by the supplier of the goods in terms of the Excise Tariff Act was 14%, it has been held that if supplier chooses to pay higher rate, the same will not result in availability of higher credit to the recipient, they would be entitled to take Cenvat credit of duty of 14% only. - Pre deposit ordered.

Summary

Issues:
- Confirmation of demand of duty by rejecting Cenvat credit availed by the appellants.
- Interpretation of Rule 3 of Cenvat Credit Rules, 2004 regarding the availability of credit based on the duty paid by the supplier.
- Decision on granting unconditional stay to the appellants and the requirement for depositing the duty amount.

Analysis:
1. The lower authorities confirmed the demand of duty by rejecting the Cenvat credit availed by the appellants, amounting to Rs.53,365, for the month of March 2008. This rejection was based on the suppliers paying excess duty at 16% ad valorem instead of the applicable rate of 14% ad valorem. The authorities cited Rule 3 of Cenvat Credit Rules, 2004, stating that the credit of duty available to the recipient is equivalent to the duty of excise specified in the Central Excise Tariff. Therefore, as the duty required to be paid by the suppliers was 14%, the appellants were entitled to take Cenvat credit of duty at the rate of 14% only.

2. The analysis of Rule 3 of Cenvat Credit Rules, 2004 reveals that a manufacturer of the final product can only take credit of the duty of excise specified in the first schedule to the Excise Tariff Act, which is leviable under the Excise Act. This provision clarifies that the recipient of inputs can only avail credit for the duty that the supplier is liable to pay based on the rates specified in the Excise Tariff Act. Thus, even if the supplier opts to pay a higher rate, it does not result in the recipient being eligible for a higher credit. The judgment emphasized that no justifiable reason existed to grant an unconditional stay to the appellants. Given that the duty amount in question was Rs.53,365, the appellant was directed to deposit this sum within four weeks and report compliance by a specified date. Upon the deposit of the duty amount, the pre-deposit of penalty was waived, and the recovery of the penalty was stayed during the appeal's pendency.

3. The decision on the stay petition was made in the terms outlined above, with the judgment pronounced in open court. The analysis of the judgment highlights the importance of adhering to the provisions of the Cenvat Credit Rules, 2004, and the implications of the duty rates paid by suppliers on the availability of credit to recipients. The judgment also underscores the procedural requirements for appellants seeking a stay and the conditions for depositing the duty amount to proceed with the appeal process effectively.