2015 (2) TMI 651 - AT - Central Excise

Disallowance of CENVAT Credit - Eligibility to utilize the AED (T&TA) for payment of Basic Excise Duty - Rule 3(6)(b) of CENVAT Credit Rules, 2002 - Penalty u/s 11AC - Held that - On plain reading of Rule 3(6)(b) of the said Rules, it is clear that the CENVAT Credit in respect of AED (T&TA) shall be utilized only towards payment of duty of Excise leviable under AED(T&TA) Act. It is noted that with effect from 09.07.2004, AED(T&TA) was exempted in respect of clearance of the final product. Therefore, the appellant cannot utilize credit of AED(T&TA) in respect of payment of basic duty for clearance of final product. Ld.Advocate heavily relied upon the Board s circular. Board s circular dt.16.04.2003 was issued in respect of utilization of CENVAT Credit of Basic Excise Duty towards payment of Additional Duties of Excise (GSI) Act, 1957. The Board s circular clarified respect of utilization of credit of Basic Excise Duty for payment of AED (T&TA). But, in the present case, the appellant utilized the AED (T&TA) for payment of Basic Excise Duty which is not covered by the Board s circular. I find that the CENVAT Credit Rules, 2002 has clearly imposed restriction of utilization of AED(T&TA) in respect of other duties. So, the appellant cannot utilize credit of AED (T&TA) for payment of Basic Excise Duty. The Tribunal in the case of Raymond Ltd (2014 (3) TMI 45 - CESTAT MUMBAI) held that the accumulated credit of AED (T&TA) cannot be utilized for payment of duty relating to AED (GSI) and for payment of Basic Excise Duty. Appellant cannot be allowed to utilize AED(T&TA), they can take a refund, if permitted under the law. Regarding imposition of penalty under Section 11AC, it is seen from the show cause notice that while examining the records, the officers detected utilization of AED(T&TA) for payment of Basic Excise Duty. There is no allegation of suppression of facts with intent to evade payment of duty. It is a case of interpretation of provisions of law. There is no material available on records to invoke the ingredients as mentioned in Section 11AC of the Central Excise Act 1944. Hence, imposition of penalty under Section 11AC cannot be warranted. - Decided partly in favour of assessee.

Summary

Issues:
Interpretation of Rule 3(6)(b) of CENVAT Credit Rules, 2002 regarding utilization of AED (T&TA) credit for payment of Basic Excise Duty.
Applicability of Board's circular F.No.345/2/2003-TRU, dt.16.04.2003 in the case.
Eligibility of appellant to utilize credit on payment of Basic Excise Duty.
Imposition of penalty under Rule 13 of CENVAT Credit Rules, 2002 read with Section 11AC of Central Excise Act 1944.

Analysis:
1. The case involved the appellant, engaged in manufacturing various textile products, receiving duty paid Yarn and availing CENVAT Credit. A show cause notice was issued proposing to recover CENVAT Credit on the ground of improper utilization for payment of Basic Excise Duty. The Adjudicating authority disallowed the credit, leading to an appeal by the appellant.
2. The appellant argued that the authorities failed to consider a Board circular clarifying the utilization of AED (T&TA) credit for payment of any duty of Excise, including Basic Excise Duty. Reference was made to precedents supporting the appellant's position.
3. The Revenue representative supported the lower authorities' findings, citing a Tribunal decision and interpreting the Board's circular differently. It was argued that the circular applied only to specific scenarios involving yarn manufacturers.
4. The appellant countered, stating that the Tribunal decision cited by the Revenue was flawed for not considering the Board's circular adequately, emphasizing the acceptance of AED (T&TA) as a duty of Excise.
5. The presiding judge analyzed Rule 3(6)(b) of the CENVAT Credit Rules, noting the restriction on utilizing AED (T&TA) credit for duties other than those specified. The judge highlighted the exemption of AED (T&TA) for final product clearance post-July 2004, rendering the appellant's credit utilization for Basic Excise Duty improper.
6. The judge pointed out that the Board's circular did not cover the appellant's situation, as it pertained to Basic Excise Duty, not AED (T&TA) payment. The Tribunal's decision in a similar case supported the restriction on utilizing AED (T&TA) credit for other duties.
7. Regarding the appellant's claim for refund of accumulated AED (T&TA) credit, the judge referred to a precedent allowing cash refunds if credit utilization was not permitted by law, concurring with the Commissioner (Appeals) on this matter.
8. The judge dismissed the imposition of penalty under Section 11AC, noting the absence of evidence of intent to evade duty payment, considering the issue as a matter of legal interpretation rather than deliberate non-compliance.
9. Consequently, the judge upheld the demand for duty with interest, set aside the penalty, and disposed of the appeal accordingly.