2024 (3) TMI 637 - HC - Central Excise

Recovery of Arrears of tax dues / duties - Denial of Exemption in terms of notification No.8/2003-CE dated 01.03.2003 - eligibility for CENVAT Credit - HELD THAT - The appellate authority modified the impugned order to the extent of affirming the tax demand subject to verification of the petitioner's eligibility for cenvat credit and the extension of benefit of such credit, if applicable. The said order has attained finality in view of the rejection of the petitioner's appeal before the CESTAT. In those circumstances, it was necessary for the original authority to give effect to the order of the appellate authority. A remand is necessary for such purpose. Meanwhile, the recovery notice was issued by treating the petitioner under the category of 'arrears'. On examining circular No.1081, such circular specifies that if there is a remand for de novo adjudication, the case will not fall within the category of 'arrears'. As indicated earlier, the appellate authority did not set aside the order of the original authority and remand the matter for de novo adjudication. Hence, the conclusion that the petitioner's case falls within the category of 'arrears' does not contain any infirmity. Nevertheless, since the direction issued by the appellate authority was not given effect to, W.P.No.2222 of 2024 is disposed of by directing the first respondent to examine the petitioner's claim for cenvat credit - petition disposed off.

Summary

Issues involved: Challenge to recovery notice dated 20.11.2023 regarding tax liability and eligibility for cenvat credit under notification No.8/2003-CE dated 01.03.2003.

Summary:

Issue 1: Tax liability and eligibility for cenvat credit
The petitioner, a manufacturer of cotton knitted under garments, cleared final products without duty payment under an exemption. Proceedings were initiated against the petitioner leading to an order-in-original confirming tax demand and penalty. The appellate authority affirmed the tax demand but directed verification of petitioner's eligibility for cenvat credit. The petitioner's appeal before the CESTAT was dismissed for non-compliance. The recovery notice was issued treating the petitioner as 'arrears' per circular No.1081/02/2022-CX. The petitioner argued that the recovery notice was premature as the matter was remanded for verification of cenvat credit eligibility.

Issue 2: Compliance with appellate order
The appellate order modified the tax demand to verify eligibility for cenvat credit, which became final due to the CESTAT dismissal. The petitioner was considered under 'arrears' category as per circular No.1081, as the appellate authority did not set aside the original order for de novo adjudication. Despite this, the appellate order directing verification of cenvat credit eligibility was not given effect to by the original authority, leading to the issuance of the recovery notice.

Judgment:
The court directed the first respondent to examine the petitioner's claim for cenvat credit and allowed submission of relevant documents within two weeks. If eligible, cenvat credit should be extended, and the payable amount computed. Bank attachment was to remain pending the outcome, with a restraint on appropriating funds in the meantime. The case was disposed of accordingly, with connected miscellaneous petitions closed and no costs awarded.