2016 (11) TMI 1094 - AT - Central Excise

Pre-deposit - relief under Rule 41 of the CESTAT (Procedure) Rules, 1982 - if the deposit made under Section 35F can be considered as duty payment against the clearance of goods made earlier - Held that - the law treats the pre-deposits differently from the duty. In these circumstances it cannot be said that more than 100% duty has been deposited. - application is dismissed.

Issues Involved:
1. Legality of recovery of ?33,78,20,452/- under Rule 8(3A) of Central Excise Rules, 2002.
2. Legality of utilization of Cenvat credit in contravention of Rule 3(4) of Cenvat Credit Rules, 2004.
3. Requirement of pre-deposit of 7.5% of the confirmed duty liability.
4. Entitlement to re-credit of the duty paid to the Cenvat credit account under Rule 41 of CESTAT (Procedure) Rules, 1982.

Issue-wise Detailed Analysis:

1. Legality of Recovery of ?33,78,20,452/-:
The Commissioner of Central Excise & Service Tax (LTU), Mumbai, ordered the recovery of ?33,78,20,452/- through account current under Rule 8(3A) of Central Excise Rules, 2002, read with Section 11A of the Central Excise Act, 1944. This was due to the applicant’s utilization of Cenvat credit in contravention of Rule 3(4) of the Cenvat Credit Rules, 2004. The Tribunal upheld this recovery, emphasizing the non obstante nature of Rule 8(3A), which overrides other provisions of the Cenvat Credit Rules to penalize defaulting assessees by denying the utilization of Cenvat Credit and requiring duty payment consignment-wise.

2. Legality of Utilization of Cenvat Credit:
The applicant’s utilization of Cenvat credit was found to be in contravention of Rule 3(4) of the Cenvat Credit Rules, 2004. The Tribunal referred to the decisions of the Hon’ble High Courts of Gujarat and Madras, which supported the view that during the forfeiture period, duty on clearances must be paid through PLA (Personal Ledger Account) and not through Cenvat Credit. The Tribunal noted that the provisions of Rule 8(3A) are designed to prevent double loss to the government by ensuring that duty is paid in cash during the default period.

3. Requirement of Pre-deposit of 7.5%:
The applicant was required to pre-deposit 7.5% of the confirmed duty liability as per Section 35F of the Central Excise Act, 1944. The Tribunal had granted the applicant four weeks to comply with this requirement, failing which the appeal would be dismissed. The applicant complied with this direction by depositing the required amount. The Tribunal reiterated that the pre-deposit is a statutory requirement for entertaining the appeal and is distinct from the duty liability.

4. Entitlement to Re-credit of Duty Paid:
The applicant sought re-credit of the duty paid to the Cenvat credit account under Rule 41 of CESTAT (Procedure) Rules, 1982. The Tribunal examined various precedents and circulars, including the Circular dated 28-8-2014 and Circular No. 984/8/2014, dated 16-9-2014. The Tribunal noted that pre-deposits made under Section 35F are treated differently from duty payments and do not take the shape of duty until adjusted against confirmed duties. The Tribunal emphasized that refunds of pre-deposits are governed by Section 35FF and are not subject to the process of refund of duty under Section 11B of the Central Excise Act, 1944. Consequently, the Tribunal dismissed the application for re-credit, stating that the law treats pre-deposits differently from duty payments, and thus, it cannot be said that more than 100% duty has been deposited.

Conclusion:
The Tribunal dismissed the application for re-credit of the duty paid to the Cenvat credit account, upholding the recovery of ?33,78,20,452/- and the requirement of pre-deposit of 7.5% of the confirmed duty liability. The Tribunal clarified that pre-deposits made under Section 35F are distinct from duty payments and are governed by different provisions for refunds.

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