2010 (3) TMI 621 - AT - Central Excise

Cenvat Availment of - the Commissioner dropped proposals to disallow credit of Additional Excise Duty under Goods of Special Importance Act 1957 taken by the respondent CEAT Ltd. (CEAT) on payment of equal amount of BED on tyres in PLA which had been initially discharged using accumulated Cenvat/Modvat credit of AED (GSI). M/s. Balakrishna Industries Ltd. seeks relief by way of appropriate orders of this Tribunal against the impugned order which demanded such AED earned prior to 1-4-2000 and utilized for payment of BED in terms of Rule 3(6)(b) of Cenvat Credit Rules 2002 (CCR) as amended vide Notification No. 13/03-C.E. (N.T.) dated 1-3-2003. This assails the order of the Commissioner confirming demand of duty paid on tyres using credit under AED (GSI).Held that debits from AED were not recognized by department as duty payment. In that view assessee could not claim their refund. Such debit could not effect balance of AED in assessee account. Assessee entitled to retain their AED credit to maintain status quo ante. Cenvat Availment of - the Commissioner dropped proposals to disallow credit of Additional Excise Duty under Goods of Special Importance Act 1957 taken by the respondent CEAT Ltd. (CEAT) on payment of equal amount of BED on tyres in PLA which had been initially discharged using accumulated Cenvat/Modvat credit of AED (GSI). M/s. Balakrishna Industries Ltd. seeks relief by way of appropriate orders of this Tribunal against the impugned order which demanded such AED earned prior to 1-4-2000 and utilized for payment of BED in terms of Rule 3(6)(b) of Cenvat Credit Rules 2002 (CCR) as amended vide Notification No. 13/03-C.E. (N.T.) dated 1-3-2003. This assails the order of the Commissioner confirming demand of duty paid on tyres using credit under AED (GSI).Held that debits from AED were not recognized by department as duty payment. In that view assessee could not claim their refund. Such debit could not effect balance of AED in assessee account. Assessee entitled to retain their AED credit to maintain status quo ante.

Issues Involved:

1. Legitimacy of credit taken under Additional Excise Duty (Goods of Special Importance) [AED (GSI)] for payment of Basic Excise Duty (BED).
2. Validity of the suo motu recredit of AED (GSI) by the assessee.
3. Applicability of the prescribed procedure for claiming refunds under Section 11B of the Central Excise Act.
4. Interpretation of statutory amendments and notifications regarding utilization of AED (GSI) credit.
5. Relevance of judicial precedents and CBEC clarifications.

Issue-wise Detailed Analysis:

1. Legitimacy of Credit Taken under AED (GSI) for Payment of BED:
The respondent, a tyre manufacturer, accumulated AED (GSI) credit from tyre cord fabrics, which did not attract AED (GSI) on final products. Initially, the Modvat/Cenvat Rules prohibited using AED (GSI) credit for other duties. However, Notification No. 13/2003-N.T., dated 1-3-2003, allowed AED (GSI) credit for BED payment. Subsequently, Section 88 of the Finance Act, 2004, retrospectively restricted using AED (GSI) credit earned before 1-4-2000 for BED payment. The respondent paid BED using AED (GSI) credit and later paid the same amount from PLA, taking recredit of AED (GSI) in their Cenvat account. The Commissioner validated this recredit, stating the respondent discharged BED through PLA initially cleared using AED (GSI) credit, thus entitled to recredit.

2. Validity of Suo Motu Recredit of AED (GSI) by the Assessee:
The Revenue argued that the respondent's suo motu recredit of AED (GSI) was impermissible without a refund claim under Section 11B. The respondent countered that the credit was taken against prescribed documents, and the payment from PLA justified recredit. The Tribunal upheld the respondent's position, referencing past judgments where recredit was allowed after duty payment from PLA.

3. Applicability of the Prescribed Procedure for Claiming Refunds:
The Revenue cited the Larger Bench decision in BDH Industries Ltd., which mandated filing for refunds under Section 11B for excess duty paid. The Tribunal distinguished this case, noting that the BDH Industries case dealt with excess duty refunds, whereas the present case involved recredit of AED (GSI) following statutory amendments. The Tribunal concluded that the recredit was justified as the initial AED (GSI) payment was not recognized as duty payment.

4. Interpretation of Statutory Amendments and Notifications:
The Tribunal examined the amendments under Finance Acts of 2004 and 2005 and relevant notifications. The Explanation introduced in Rule 3(6)(b) of CCR, effective from 1-3-03, barred using AED (GSI) credit earned before 1-4-2000 for BED payment. The Tribunal found that since the AED (GSI) credit was not recognized as duty payment, the recredit was valid once the duty was paid from PLA.

5. Relevance of Judicial Precedents and CBEC Clarifications:
The Tribunal referenced several precedents where recredit was allowed after duty payment from PLA. It also considered CBEC Circular No. 7/16/2003-C.X., which did not cap AED (GSI) credit use before 1-3-2003. The Tribunal concluded that the respondent's recredit was legitimate and aligned with judicial precedents and CBEC clarifications.

Conclusion:
The Tribunal sustained the Commissioner's order allowing the recredit of AED (GSI) and rejected the Revenue's appeal. In the related appeal by M/s. Balkrishna Industries Ltd., the Tribunal granted relief, allowing credit of Rs. 1,39,71,940/- paid pursuant to the impugned order. The cross-objection by the department was also rejected.

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