2013 (2) TMI 617 - AT - Central Excise

Utilization of credit of additional excise duty of Textiles & Textile Articles towards payment of basic excise duty denied - assessee contested that credit was utilized after due permission of Assistant Commissioner, therefore the demand is not sustainable - Held that - There is no provision under the Cenvat Credit Rules for utilization of credit of additional excise duty towards payment of basic excise duty and the only provision in the rules for the refund or rebate under Rule 5 of rules is admissible for accumulated credit of additional excise duty in respect of inputs used in the manufacture of exported goods. Prima facie it is not a case for total waiver of duty, thus the applicants directed to deposit ₹ 9,00,000/- within eight weeks. Compliance on 1.3.2013.

Summary

Issues:
1. Application for waiver of pre-deposit of duty, interest, and penalty.
2. Utilization of credit of additional excise duty towards payment of basic excise duty.
3. Jurisdictional Assistant Commissioner's permission and subsequent reversal by Commissioner (Appeals).
4. Interpretation of Rule 3(7)b of the Cenvat Credit Rules.
5. Provision for refund or rebate under Rule 5 for accumulated credit of additional excise duty.

Analysis:

The case involves an application for waiver of pre-deposit of duty, interest, and penalty amounting to Rs.38,47,529/- by a textile manufacturer who utilized credit of additional excise duty towards payment of basic excise duty on finished goods. The dispute arose when a show cause notice was issued, alleging improper utilization of the credit. The applicant argued that they had obtained permission from the jurisdictional Assistant Commissioner for such utilization, which was later reversed by the Commissioner (Appeals) based on an appeal by the Revenue. The main contention was whether the utilization of credit after due permission made the demand unsustainable.

The Revenue relied on Rule 3(7)b of the Cenvat Credit Rules, contending that the credit of additional excise duty can only be used for payment of additional excise duty and not for basic excise duty. The Tribunal, after considering the facts and circumstances of the case, noted that there was no provision under the rules for utilizing credit of additional excise duty towards basic excise duty. Additionally, the only provision for refund or rebate under Rule 5 was applicable to accumulated credit of additional excise duty in the case of inputs used for manufacturing exported goods. Consequently, the Tribunal found that it was not a case warranting total waiver of duty. Therefore, the applicants were directed to deposit Rs.9,00,000/- within eight weeks, with the remaining amount of dues being waived upon this deposit. The recovery of the waived amount was stayed during the pendency of the appeal.

In conclusion, the judgment clarified the limitations on the utilization of credit of additional excise duty and highlighted the provisions for refund or rebate under the Cenvat Credit Rules. The decision to partially waive the duty amount was based on a lack of provision for utilizing such credit towards basic excise duty and the specific conditions for refund or rebate under the rules.