2016 (11) TMI 315 - HC - Central Excise

Compliance stay order - payment through cenvat credit - debit entry made in the ledger - Held that - The subsequent claim of deposit by way of a debit entry in a ledger cannot be construed as a sufficient deposit of security against an amount found due and payable by an adjudicating authority. The debit entry has been made on the basis of an assumption that the petitioner would be entitled to a credit in respect of certain goods. That credit may or may not ultimately fructify. Without that credit actually fructifying, the petitioner cannot claim such credit for the purpose of making a debit entry in discharge of its liability. First a credit has to become an asset of the petitioner for the same being used for the purpose of discharge a liability of the petitioner. By making a debit entry, essentially, the petitioner is trying to utilise public money to secure the claim of the authorities. - Not allowed - Amount to be deposited in Cash.

Summary

Issues: Challenge to order of Customs, Excise Service Tax Appellate Tribunal; Interpretation of deposit requirement; Adequacy of debit entry in ledger; Compliance with direction for deposit; Cash deposit as security requirement.

The judgment pertains to a challenge against an order of the Customs, Excise Service Tax Appellate Tribunal. The petitioner sought to make a debit entry of ? 7 lakhs in the ledger, claiming it as a deposit in line with the Tribunal's earlier order. However, the Court found that the debit entry could not be considered a sufficient deposit of security against the amount due, emphasizing that the petitioner must make a cash deposit as security. The Court highlighted that the credit assumed for the debit entry may not materialize, and without it becoming an asset, the petitioner cannot claim it to discharge the liability. The Court noted that the petitioner failed to comply with the direction for deposit, leading to the dismissal of the appeal for non-compliance with Section 35F of the Central Excise Act.

Furthermore, the judgment pointed out that the order directing the pre-deposit was not under challenge, and it must be understood that the petitioner was required to make a cash deposit as security. Despite being given the opportunity to deposit ? 7 lakhs in cash, the petitioner expressed inability to do so. Consequently, the Court found the debit entry in the ledger to be inadequate and dismissed the petition, emphasizing the necessity of a cash deposit as security in such circumstances. The judgment concluded by dismissing the petition without any order as to costs.