2013 (9) TMI 168 - AT - Central Excise

Amount Utilisation from GSI Credit Account - Recredit in the GSI Credit Account - Whether the recredit/restoration, in the AED(GSI) credit account, of an amount equal to the BED paid by the assessee in 36 instalments was legally sustainable - Whether the utilization of an amount from the AED(GSI) credit so restored for payment of AED(GSI) on DNTCF manufactured and captively consumed in the manufacture of tyres was legally sustainable - Held that - The credit needed to be restored and was correctly ordered so by the Commissioner - The debits were held to be of no consequence when the assessee was required to pay duty initially discharged using AED (GSI) credit Following the Judgement of MOTOROLA INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., BANGALORE-III 2005 (9) TMI 152 - CESTAT, BANGALORE - there were considerable merit in the finding of the Commissioner that but for the statutory changes introduced with effect from 1-3-03 following which the assessee had discharged the duty liability on tyres using AED (GSI) - All types of refund have to be filed under the Central Excise Act and Rules made thereunder and no suo motu credit of the duty paid in excess may be taken by the assessee - it would have continued to have the impugned credit in its account the commissioner correctly held that the respondent had taken the impugned credit under valid duty paying documents under cover of which inputs had been received Order set aside Decided in favour of Assessee. The credit had been legitimately earned by the assessee on procurement of inputs on payment of duty and used for payment of duty following the amendment of Cenvat Credit Rules under Budget 2003 - Vide Circular No. 7/16/2003-C.X. the CBEC had also clarified that it was considered appropriate not to put any cap on the use of the AED (GSI) credit accruing prior to 1-3-2003 - In terms of the provisions enacted in Finance Act, 2004, the debits were held not amounting to payment of duty and the assessee was required to meet the same obligation by payment from PLA. The proper procedure to take re-credit of Cenvat credit wrongly used was to file refund claim under Section 11B of the Central Excise Act. Vide the impugned order, the Commissioner held that the appellants were entitled to restoration of the AED (GSI) equal to the amount it paid towards BED on tyres, which had been initially discharged using accumulated credit under AED (GSI) available as on 1-3-2003. Availment of Credit Utilization for Payment - Whether the availment of credit of AED(GSI) paid on DNTCF in March 2008 was legally sustainable - Whether its utilization for payment of BED on tyres in May 2008 was legally correct - Held that - CENVAT credit of this duty was available to the appellant for utilization in payment of BED on the final product here what the assessee did was utilization of the AED(GSI) paid on DNTCF long after 01/04/2000 in payment of BED on their final product - relying upon GOODYEAR INDIA LTD. Versus COMMISSIONER OF C. EX., FARIDABAD 2005 (10) TMI 400 - CESTAT, NEW DELHI - DNTCF processed from NTCF in the appellant s factory was input vis--vis the final product - in the manufacture of which it was captively used - AED(GSI) was paid on this input by the appellant in March 2008 - both the issues were liable to be held in favour of the appellant - the penalties imposed on the appellant were also liable to be set aside Order set aside Decided in favour of assesse.

Summary

Issues Involved:
1. Legality of recredit/restoration of AED(GSI) credit account after payment of BED in instalments.
2. Legality of utilization of restored AED(GSI) credit for payment of AED(GSI) on DNTCF.
3. Availment and utilization of AED(GSI) credit on DNTCF for payment of BED on tyres.
4. Imposition of interest and penalties.

Detailed Analysis:

1. Legality of Recredit/Restoration of AED(GSI) Credit Account:
The appellant restored AED(GSI) credit in their CENVAT account after repaying BED in instalments. The Department contested this, claiming the recredit was improper. The Tribunal referred to the case of CEAT Tyres, where it was established that once BED was paid from the PLA, the AED(GSI) credit should be restored. The Tribunal upheld the appellant's action, stating that the credit was legitimately earned and should be restored once the duty was paid from the PLA. The Tribunal found that the Commissioner correctly allowed the appellant to retain the AED(GSI) credit and maintain status quo ante.

2. Utilization of Restored AED(GSI) Credit for Payment of AED(GSI) on DNTCF:
The appellant utilized restored AED(GSI) credit for payment of AED(GSI) on DNTCF, which was captively consumed in tyre manufacturing. The Department argued this was irregular. The Tribunal, referencing CEAT Tyres, concluded that the appellant's utilization of AED(GSI) credit for payment of AED(GSI) on DNTCF was legally sustainable. The Tribunal noted that the credit was intended to be used for duty payment and that the appellant's actions were in line with the legal provisions.

3. Availment and Utilization of AED(GSI) Credit on DNTCF for Payment of BED on Tyres:
The appellant availed AED(GSI) credit on DNTCF in March 2008 and used it to pay BED on tyres in May 2008. The Department contested this, but the Tribunal referenced the Goodyear (India) Ltd. case, which was affirmed by the Punjab & Haryana High Court. The Tribunal found that the AED(GSI) paid on DNTCF after 01/04/2000 could be utilized for payment of BED on tyres. The Tribunal upheld the appellant's actions, stating that the credit utilization was legally correct and supported by judicial precedent.

4. Imposition of Interest and Penalties:
The Department imposed interest and penalties on the appellant for the alleged wrongful restoration and utilization of AED(GSI) credit. Given the Tribunal's findings that the appellant's actions were legally sustainable, the penalties were deemed unjustified. The Tribunal set aside the penalties, aligning with the principle that penalties should not be imposed when the actions are legally compliant.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders. The appellant's restoration and utilization of AED(GSI) credit were found to be legally sustainable, and the penalties imposed were annulled. The Tribunal's decision was consistent with previous judicial rulings, particularly in the cases of CEAT Tyres and Goodyear (India) Ltd.