2018 (11) TMI 80 - HC - Central Excise

Demand of pre-deposit in cash for maintenance of appeal - whether such pre-deposit can be made only by cash or also by availing credit in cenvat account? - Held that - It appears that Commissioner had not even put the petitioners to notice about the decision that he took in this regard. This was thus not a case of by parte hearing culminating into a quasi judicial decision formed by the Commissioner which was a mere communication of his opinion that such pre-deposit must be made in cash. Even otherwise, it is well settled that mere availing of alternative remedy is not a bar to entertain a writ petition. Even the ground of delay is not valid. The petitioners after receiving the communications in question made detailed correspondence with the departmental authorities trying to persuade them that the pre-deposit as well can be made with the aid of cenvat credit. Having failed in receiving the positive response, this petition came to be filed. Essentially, credit in an assessee s cenvat account is a duty he has already suffered which he can encash for specified purposes subject to conditions laid down under the Rules. Predeposit made by the petitioners by availing cenvat credit shall be accepted for the purpose of section 35F of the Central Excise Act - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to communications demanding pre-deposit in cash instead of cenvat credit for maintaining appeals.

Analysis:
The petitioners challenged communications from the Commissioner demanding pre-deposit in cash instead of cenvat credit for maintaining appeals. The disputes arose from availing cenvat credit on sales promotion charges under business auxiliary service. The Adjudicating authority disallowed the credit, imposed a penalty, and required a pre-deposit for appeal. The petitioners deposited the specified sum by debiting the cenvat credit account, citing department acceptance and a CESTAT circular. The Commissioner insisted on cash deposit, leading to the petitioners approaching the High Court.

The petitioners argued that there is no statutory bar on using cenvat credit for pre-deposit, citing judgments from Jharkhand High Court, Allahabad High Court, and Ahmedabad Tribunal. The department contended that the order was appealable, and the petition was belated. The High Court addressed the objections to maintainability, noting the nature of the Commissioner's decision and the lack of notice on the pre-deposit method. The court clarified that seeking an alternative remedy does not bar a writ petition, and the delay was not substantial.

Regarding the central issue, the High Court found the Commissioner's stand incorrect. It noted that cenvat credit is a duty already suffered by the assessee and can be utilized for specific purposes under the Rules. Citing judgments from Jharkhand High Court and Allahabad High Court, the court ruled that there is no prohibition on using cenvat credit for pre-deposit, especially when departmental authorities have accepted such practices. Consequently, the High Court quashed the impugned communications, accepted the pre-deposit made through cenvat credit, and directed the Commissioner to hear the appeals on merits.

In conclusion, the High Court disposed of the petition in favor of the petitioners, emphasizing the validity of using cenvat credit for pre-deposit and ensuring the appeals proceed on their merits.