2014 (8) TMI 530 - AT - Central Excise

Modification of stay order - distribution of a substantial portion of the credit to the applicant using the percentage of overhead expenses in the total expenses as a template - violation of Rule 7(b) of the Rules, 2004 - Conditional stay order granted by Tribunal - Held that - certificate issued by the Chartered Accountant after passing of the stay order cannot be accepted in the modification application as the same was not placed at any point of time, before the lower authorities. It would be reconsideration of an interlocutory order on merits which is not permissible under the law. In view of that, we do not find any merit in the application filed by the applicant. However, considering the facts and circumstances of the case, we extend the period of compliance for further 8 weeks - Decided in favour of assessee.

Summary

Issues:
1. Application for waiver of predeposit of CENVAT credit under Section 35F of Central Excise Act, 1944.
2. Modification of stay order based on incorrect recording of facts.
3. Evidence submission post stay order issuance.
4. Interpretation of Rule 7(b) of Cenvat Credit Rules.
5. Allegation of violation of Rule 7(b) of CENVAT Credit Rules, 2004.
6. Acceptance of evidence post stay order issuance.

Analysis:

1. The applicant filed an appeal seeking waiver of predeposit of CENVAT credit along with interest and penalty. A predeposit amount was directed to be made within a specified time frame, leading to a subsequent application for modification of the stay order.

2. The advocate for the applicant argued that the facts of the case were inaccurately recorded in the initial stay order. It was contended that the demand was based on a wrong method of credit distribution by the Input Service Distributor (ISD), which was not alleged in the show cause notice or adjudication order. Evidence was presented to support the claim that credit related to exempted goods was deducted during distribution, challenging the sustainability of the service tax demand.

3. The Revenue's representative opposed the acceptance of evidence submitted post stay order issuance, citing legal precedents. The Tribunal was urged to consider the initial order based on the interpretation of Rule 7(b) of Cenvat Credit Rules, emphasizing that the plea regarding credit deduction was not raised earlier in the proceedings.

4. The Tribunal examined Rule 7(b) of Cenvat Credit Rules, highlighting the prohibition on distributing credit related to units exclusively engaged in manufacturing exempted goods. The stay order indicated a prima facie violation of this rule due to the method used by the ISD in distributing credit. The Tribunal found that the method adopted was in clear violation of the rule's conditions.

5. The show cause notice alleged that the ISD distributed credit using a method violating Rule 7(b) of CENVAT Credit Rules, 2004. The Tribunal upheld this allegation in the stay order, emphasizing the applicant's non-compliance with the distribution methods outlined in the rules.

6. Despite the applicant's submission of evidence post stay order issuance, the Tribunal rejected its admissibility, stating that new evidence cannot be considered during a modification application. The Tribunal extended the compliance period but dismissed the modification application, emphasizing that reconsideration of an interlocutory order on merits was impermissible.

In conclusion, the Tribunal upheld the initial stay order, emphasizing the importance of compliance with Cenvat Credit Rules and the inadmissibility of new evidence post issuance of the order.