2013 (12) TMI 698 - AT - Central Excise

Effect of Amendment in Notification No.48/2000 Cenvat credit availed on inputs Payment of duty on finished products as per Rule 57AB of cenvat credit rules 1944 - Held that - On the date of payment of duty i.e. on 19.8.2000 the position in law was that the appellant could have utilized credit earned upto 15.8.2000 for the payment of duty for the first fortnight of August, 2000 - the adjudicating authority is correct in concluding that the appellant was not eligible for the credit earned on16th & 17 th August, 2000 for payment of duty for the first fortnight of the month - this amounts to advance utilization of credit thus, the appellant shall be liable to pay only interest on the credit utilized the credit earned on 16 th & 17 August, 2000 for payment of duty w.e.f. from 1.9.2000 onwards. The appellant has utilized the credit on 19.8.2000, the appellant is liable to pay interest on the wrong utilization for the period from 19.8.2000 to 31.8.2000 - the rule provides for payment of interest @ 24% - the confirmation of interest for the period 19.8.2000 to 31.8.2000 is sustainable in law it is related to interpretation of law, no penalty can be imposed Decided partly in favour of Assessee.

Summary

Issues:
Interpretation of CENVAT Credit rules regarding utilization of credit accrued before and after the amendment on 18.8.2000; Eligibility of the appellant to utilize excess credit for payment of duty; Liability of the appellant for interest and penalty under Central Excise Rules, 1944.

Analysis:
The appeal in this case is against an Order-in-Original passed by the Commissioner of Central Excise, Belapur, concerning the utilization of CENVAT Credit by the appellant, a manufacturing company. The appellant availed CENVAT Credit of duty paid on inputs for payment of duty on finished products as per Rule 57AB of the Central Excise Rules, 1944 during the year 2000. A proviso inserted in Rule 57AB by Notification No. 48/2000-CE on 18.8.2000 restricted the utilization of CENVAT Credit accrued up to specific dates for payment of duty. The appellant had an excess utilization of credit amounting to Rs.27,65,412/- for the first fortnight of August 2000, leading to a dispute with the adjudicating authority. The authority held the appellant ineligible for this excess credit utilization, ordering recovery of interest and imposing a penalty of Rs. 5 lakhs under Rule 173Q of Central Excise Rules, 1944.

The main contention raised by the appellant's counsel was that the amendment to CENVAT Credit rules through Notification No. 48/2000 dated 18.8.2000 had prospective effect and, therefore, the credit accrued before this date could be utilized for payment of duty. The counsel relied on a Tribunal decision supporting this argument. On the other hand, the Revenue's representative supported the adjudicating authority's findings, emphasizing that the appellant was not entitled to utilize the credit post the rule amendment. The appellant's eligibility for credit utilization and liability for interest and penalty under the Central Excise Rules were the key points of contention between the parties.

The Tribunal analyzed the case and concluded that the appellant could have utilized the credit earned before the amendment up to specific dates for payment of duty for the first fortnight of August 2000. However, the appellant's utilization of credit on 19.8.2000, after the rule amendment, was considered as advance utilization. The Tribunal held that the appellant was liable to pay interest on the advance utilization of credit from 1.9.2000 onwards. The confirmation of interest for the period from 19.8.2000 to 31.8.2000 at 24% was deemed legally sustainable. As the case involved the interpretation of law, the Tribunal set aside the penalty of Rs. 5 lakhs imposed on the appellant under Rule 173Q of Central Excise Rules, 1944.

In conclusion, the Tribunal disposed of the appeal by allowing the appellant to utilize the credit earned before the rule amendment for specific dates and holding the appellant liable for interest on advance credit utilization. The penalty imposed on the appellant was set aside due to the nature of the case concerning the interpretation of law.