2015 (10) TMI 1816 - AT - Central Excise

Pre-deposit of penalty amount by utilizing cenvat credit - Penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that - It is axiomatic that Cenvat credit could be availed only for remittance of duty and interest and not for penalty. Since the appellant had remitted the disallowed component of Cenvat credit and the interest thereon by reversing from his Cenvat account and such reversal or debit to the Cenvat account cannot be utilised for remittance of penal liability under the Act, the obligation of the appellant to remit 7.5% of the penalty imposed by the impugned order, is unavoidable. - appellant shall remit the compulsory deposit in cash within four weeks - Decided against assessee.

Summary

Issues: Appeal against adjudication order disallowing Cenvat credit, imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appeal was filed against the adjudication order disallowing Cenvat credit of &8377; 1,35,45,628/- and imposing a penalty equivalent to the disallowed amount. The appellant contested the penalty and disallowance of Cenvat credit, focusing on the penalty component.

2. The appellant failed to remit the compulsory 7.5% deposit required under the amended Section 35F of the Central Excise Act, 1944. The appellant argued that since the entire disallowed Cenvat credit amount along with interest was remitted, the pre-deposit was unnecessary, as more than 7.5% of the liability had been paid.

3. The Tribunal clarified that Cenvat credit can only be used for duty and interest remittance, not for penalties. Even though the appellant had remitted the disallowed Cenvat credit and interest, this amount could not be used to pay the penalty. Therefore, the obligation to pay 7.5% of the penalty remained, and the appellant was directed to make the compulsory deposit in cash within four weeks.

4. The Tribunal upheld the office objections and rejected the appellant's argument that the Cenvat credit reversal constituted compliance with the amended Section 35F of the Act. The appellant was instructed to make the required deposit to fulfill the obligation under the law.

This detailed analysis covers the issues raised in the appeal against the adjudication order disallowing Cenvat credit and imposing a penalty, along with the Tribunal's decision regarding the compulsory deposit under the Central Excise Act, 1944.