2015 (10) TMI 1312 - AT - Central Excise

Denial of CENVAT Credit - Imposition of penalty - Cenvat credit is sought to be denied on the premise that applicant has utilized Cenvat credit account for payment of duty during the period of default whereas he has not paid duty in time - Held that - applicants have made out a case for complete waiver of pre-deposit. In these circumstances, I waive the requirement of pre deposit of entire amount of service tax, interest and penalty and stay recovery thereof during pendency of the appeals. - Decision in the case of Indsur Global Ltd. 2014 (12) TMI 585 - GUJARAT HIGH COURT followed - Stay granted.

Summary

Issues:
1. Stay of operation of the impugned order requested by Revenue.
2. Stay of part of the impugned order requested by the assessee regarding denial of Cenvat credit.

Analysis:

Issue 1: Stay of operation of the impugned order requested by Revenue
The Revenue sought a stay of the impugned order, arguing that the penalty against the assessee had been reduced by the learned Commissioner (Appeals). The Revenue wanted the stay to recover the penalty as per the adjudication order. However, the Member found this argument unacceptable on the principle of equality. Staying the operation of the impugned order solely to give the Revenue the right to recover dues confirmed by the adjudication order was deemed unjust. Consequently, the application for stay filed by the Revenue was dismissed.

Issue 2: Stay of part of the impugned order requested by the assessee regarding denial of Cenvat credit
The assessee requested a stay of part of the impugned order related to the denial of Cenvat credit. The contention was that the denial of Cenvat credit, along with interest, was not sustainable as Rule 8(3A) of the Rules had been declared ultra vires by the Hon'ble Gujarat High Court in a specific case. The assessee argued that the denial of Cenvat credit was based on the premise that the credit account was used for duty payment during a default period without timely duty payment. The learned Counsel for the assessee prayed for a stay based on these grounds. On the contrary, the learned AR opposed this argument, citing decisions from different High Courts that supported the denial of Cenvat credit under Rule 8(3A). After hearing both parties and considering the conflicting decisions of various High Courts, the Member granted a complete waiver of the pre-deposit requirement for the entire amount of service tax, interest, and penalty. The recovery of these amounts was stayed during the pendency of the appeals.

This judgment highlights the importance of fairness and legal precedents in deciding on stay applications and the denial of Cenvat credit, showcasing the Member's careful consideration of arguments presented by both the Revenue and the assessee.