2002 (10) TMI 137 - AT - Central Excise

Summary

Issues:
1. Utilization of excess Cenvat credit by the appellants.
2. Allegations of the department regarding the denial of Cenvat credit benefit.
3. Imposition of duty and penalty by the Commissioner of Central Excise.
4. Interpretation of Rule 57AB(1)(b) of the Central Excise Rules, 1944.
5. Validity of the proviso to Rule 57AB(1)(b) and its retrospective effect.
6. Applicability of Board's Circular No. 542/38/2000-CX.

Analysis:

1. The appellants, engaged in manufacturing tyres and tubes, were accused of utilizing excess Cenvat credit amounting to Rs. 40,98,661, which the department claimed was not available to them under Rule 57AB(1)(b) of the Central Excise Rules, 1944. The dispute arose from the utilization of Cenvat credit balance for duty payment on goods cleared during a specific period, leading to a demand for duty recovery and penalty imposition by the department.

2. The appellants argued that the Cenvat credit in question was rightfully taken only on inputs received and accounted for in a specific period, and the utilization of credit was in compliance with the relevant rules. They contended that the proviso to Rule 57AB(1)(b) was introduced after the credit entry, and thus, had no retrospective effect on their case. The appellants maintained that they were entitled to utilize the Cenvat credit as per the main provision of the rule, without the proviso.

3. The Commissioner of Central Excise upheld the duty demand and imposed a penalty on the appellants. However, the appellants challenged this decision, arguing that their utilization of credit was lawful and in accordance with the rules. They emphasized their right to take credit on duty-paid inputs and utilize it for duty payment on final products cleared during the relevant period, asserting that no penalty should be imposed.

4. The Tribunal analyzed Rule 57AB(1)(b) and the proviso in question, along with the Board's Circular, to determine the applicability of the rules in the appellants' case. It was established that the utilization of Cenvat credit by the appellants was in line with the main provision of the rule, and the proviso introduced later did not have a retrospective effect to cover the credit entry made earlier. Therefore, the Tribunal set aside the Commissioner's order, allowing the appeal in favor of the appellants.

5. The Tribunal clarified that the Board's Circular, which restricted credit utilization to inputs received within specific fortnights, did not prevent the appellants from utilizing the credit for duty payment on goods cleared during the relevant period. The decision highlighted the lawful nature of the credit utilization by the appellants, leading to the dismissal of the penalty under Rule 173Q(1) and the reversal of the duty demand imposed by the Commissioner.