2015 (10) TMI 965 - AT - Central Excise

Waiver of pre deposit - Section 35F - Debit made in CENVAT Credit account - Mandatory pre deposit - Held that - The entire dispute in the case relates to the incorrectness of the utilisation of the amount used from CENVAT account. The order of the Commissioner clearly does not recognize the payments made through said account and orders payment in cash. In view of the fact that the Rule 8(3A) as well as the order of the Commissioner clearly distinguishing between the payment in cash with payment through CENVAT, the same can not be equated. - appeal is therefore liable to be dismissed as non maintainable for lack of compliance of requirement of Section 35F - However, in the interest of justice, we grant four weeks time to pay 7.5% of the disputed amount and report compliance on 20.10.2015. Case law pf PMT 2015 (10) TMI 975 - CESTAT MUMBAI relied upon by assessee distinguishable.

Summary

Issues Involved:
1. Maintainability of the appeal without the mandatory pre-deposit under Section 35F of the Central Excise Act, 1944.
2. Validity of payment of duty through CENVAT credit during the default period under Rule 8(3A) of the Central Excise Rules, 2002.

Detailed Analysis:

1. Maintainability of the Appeal Without Mandatory Pre-Deposit:

The appellants argued that they have paid the entire duty amount from their CENVAT account, which should suffice as the pre-deposit required under Section 35F of the Central Excise Act, 1944. They relied on a CESTAT circular dated 28.08.2014, which states that a mandatory deposit made from the CENVAT account can be considered sufficient. The appellants also cited the High Court of Allahabad's decision in the case of India Casting Company and the Tribunal's decision in PMT Machines, where debits in the CENVAT account were deemed sufficient compliance for the purpose of Section 35F.

Conversely, the learned AR contended that the merits of the case cannot be examined at the stage of maintainability and that only Section 35F should be considered. According to Section 35F(ii), the appeal cannot be entertained unless the specified amount is deposited. The learned AR further argued that considering the reversal of amounts in the CENVAT account would amount to entertaining the appeal on its merits, which is not permissible at this stage. The AR relied on the Tribunal's decision in CIRON Drugs and Pharmaceuticals, where it was held that deposits made during the investigation cannot be considered towards the pre-deposit requirement under Section 35F.

The Tribunal examined the rival contentions and concluded that the present dispute solely concerns the maintainability of the appeal. The decision of the Hon'ble High Court of Gujarat and the Tribunal in Neesa Infrastructure, which were cited by the appellants, pertain to the merits of the case and not the maintainability. The Tribunal noted that the law on this issue is not settled, as evidenced by conflicting views from different courts, including the Hon'ble Supreme Court in the case of Jayaswal Neco.

2. Validity of Payment of Duty Through CENVAT Credit During Default Period:

The appellants contended that they had paid the entire duty amount from their CENVAT account, making them compliant with the duty demand. They argued that the prohibition on using CENVAT credit during the default period under Rule 8(3A) should not apply once the default is made good along with the appropriate interest. They cited various decisions, including Meenakshi Associates and Neesa Infrastructure, to support their argument that payments made through CENVAT credit during the default period become valid once the default is rectified.

The learned AR argued that Rule 8(3A) explicitly requires the payment of duty in cash during the default period, and any payment through CENVAT credit is not a proper discharge of duty liability. The AR emphasized that the Tribunal should not consider the merits of the case at the maintainability stage and should focus solely on compliance with Section 35F.

The Tribunal examined the relevant provisions and case law and concluded that the debits made in the CENVAT account during the default period cannot be considered sufficient compliance for the purpose of Section 35F. The Tribunal noted that the circular of the CESTAT issued on 28.08.2014 equates cash payment of duty with debits made in the CENVAT registers, but this applies to normal situations where the debit through CENVAT is not under challenge. In the present case, the impugned order disallows the debit in CENVAT and does not recognize it as payment of duty. The Tribunal emphasized that the whole purpose of Section 35F is to ensure compliance with orders issued by authorities before entertaining an appeal.

Conclusion:

The appeal was dismissed as non-maintainable due to the lack of compliance with the requirement of Section 35F. However, in the interest of justice, the Tribunal granted the appellants four weeks to pay 7.5% of the disputed amount and report compliance.