2014 (3) TMI 746 - AT - Central Excise

Duty demand - Contravention of provisions of Rule 8(3A) of Central Excise Rules, 2002 - Utilization of Cenvat credit during 8/06 to 2/07 without clearing outstanding amount including interest - Held that - Wordings in the Rule such as duty for each consignment at the time of removal without utilising the Cenvat credit refers to clearances of goods to be made during suspension period and not to the clearances already made in the past. Therefore I find that restriction imposed in the rule not to utilise Cenvat credit is applicable to clearances to be made during suspension period and it is not applicable to payment of outstanding amount of duty relating to past clearances - As rightly observed by the Commissioner (A), the provisions of Section 8(3)(A) are not attracted in respect of the amounts payable during the default period but the consignment-wise payment of duty and non-utilisation of CENVAT credit are applicable only in respect of clearances which are made during the period default continues - Decided against Revenue.

Issues:
1. Utilization of Cenvat credit for payment of excise duty during a suspension period.
2. Interpretation of Rule 8(3A) of Central Excise Rules, 2002 regarding payment of arrears of duty through Cenvat credit account.
3. Applicability of restrictions on Cenvat credit utilization to clearances made during suspension period.

Issue 1: Utilization of Cenvat credit for payment of excise duty during a suspension period

The respondents, manufacturers of transformers, defaulted in paying excise duty for goods cleared in January 2006 and April 2006. A Joint Commissioner passed an order directing the payment of excise duty for four months without utilizing Cenvat credit. However, the Revenue observed that the respondents used Cenvat credit between 8/06 to 2/07 without clearing the outstanding amount, leading to a Show Cause Notice demanding the duty paid in Cenvat account by cash with interest and penalty.

Issue 2: Interpretation of Rule 8(3A) of Central Excise Rules, 2002 regarding payment of arrears of duty through Cenvat credit account

The original authority upheld the JAC order, stating that the restriction on utilizing Cenvat credit for payment of excise duty during the suspension period applies only to clearances made during that period. The respondents argued that they paid arrears through Cenvat credit for 6/06 and 7/06, as they resumed the normal monthly payment system in 2/07. They also cited a similar case where the Joint Commissioner ruled in favor of the assessee.

Issue 3: Applicability of restrictions on Cenvat credit utilization to clearances made during suspension period

The Commissioner (A) allowed the appeal filed by the respondents, emphasizing that the provisions of Rule 8(3A) do not apply to amounts payable during the default period. The Commissioner clarified that consignment-wise duty payment and non-utilization of Cenvat credit are only relevant for clearances made during the default period. The Tribunal concurred with the Commissioner's findings, rejecting the Revenue's appeal and upholding the decision in favor of the respondents.

This judgment clarifies the interpretation of Rule 8(3A) of the Central Excise Rules, 2002 regarding the utilization of Cenvat credit for payment of excise duty during a suspension period. It emphasizes that the restrictions on Cenvat credit apply to clearances made during the suspension period and not to the payment of outstanding duty for past clearances. The decision provides clarity on the application of rules in cases of default in excise duty payment and the utilization of Cenvat credit, ensuring compliance with the legal provisions governing such matters.

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