2013 (12) TMI 1289 - AT - Central Excise

Benefit of Cenvat credit denied as per Rule 8(3A) of Central Excise Rule, 2002 - Default persisted more than 30 days Waiver of Pre-deposit Held that - Following Manjunatha Industries Versus CCE 2013 (4) TMI 534 - KARNATAKA HIGH COURT - Cenvat Credit was unavailable, the question of utilizing such credit would be an exercise in nullity - the appellant directed to make a pre-deposit of ₹ 7,36,74,043 upon such submission rest of the duty to be waived till the disposal Partial stay granted.

Summary

Issues:
- Default in payment of Central Excise duty from April 2011 to March 2012.
- Denial of Cenvat Credit and demand of duty.
- Imposition of interest and penalty.
- Interpretation of Rule 8 (3A) of the Central Excise Rule, 2002.

Analysis:

Issue 1: Default in Payment of Central Excise Duty
The appellant, M/s. Gajlaxmi Steel Pvt. Ltd., consistently defaulted in payment of Central Excise duty amounting to Rs.1,44,83,942/- from April 2011 to March 2012. A show-cause notice was issued invoking Rule 8 (3A) of the Central Excise Rule, 2002, proposing to deny the benefit of Cenvat Credit for payment of duty due to the persistent default. The duty demand of Rs. 8,88,02,216/- was confirmed against the appellant, with a Cenvat Credit of Rs. 7,36,74,043/- sought to be denied during the impugned period.

Issue 2: Denial of Cenvat Credit and Demand of Duty
The adjudicating authority confirmed the duty demand against the appellant but allowed them to take credit if the amount of Rs. 7,36,64,043/- was paid in cash. Additionally, interest was demanded under Rule 11AA of the Central Excise Act, 1944, along with a penalty of Rs. 35 lakhs imposed under Rule 25 of Central Excise Rules, 2002. The appellant contested this denial of Cenvat Credit and the duty demand, seeking relief based on previous tribunal decisions.

Issue 3: Imposition of Interest and Penalty
The appellant argued that subsequent payments had rectified the default, citing previous tribunal decisions granting relief in similar cases. However, the Revenue contended that the appellant's willful default was evident, as they had consistently paid duty only through Cenvat Credit without making additional payments when necessary. The Revenue sought to uphold the duty demand and penalties imposed, emphasizing the provisions of Rule 8 (3A) and the consequences of default.

Issue 4: Interpretation of Rule 8 (3A)
The Tribunal analyzed Rule 8 (3A) which prohibits utilizing Cenvat Credit for duty payment if the assessee defaults in payment for more than 30 days. The Tribunal emphasized the importance of giving full effect to statutory provisions and cited the principle that no law should be interpreted in a way that renders it ineffective. Relying on the decision of the Hon'ble High Court of Karnataka in a similar case, the Tribunal directed the appellant to make a pre-deposit of Rs. 7,36,74,043/- within three months, with further compliance and waiver of balance dues upon such payment.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the Tribunal's interpretation of relevant legal provisions leading to the final decision.