2012 (12) TMI 506 - AT - Central Excise

Waiver of pre-deposit - denial of cenvat credit Held that - applicant purchased certain quantity of duty paid grey fabrics and sent to M/s. Natraj Processors for processing. M/s. Natraj Processors availed credit in respect of the duty paid on grey fabrics and subsequently without undertaking any processing cleared the grey fabrics to the applicant under their invoices showing payment of duty - applicant availed credit on the strength of invoices issued by M/s. Natraj Processors - at the time of clearance of grey fabrics M/s. Natraj Processors no duty has been paid or reversed - which was paid subsequently after three years - supplier of goods as well as the applicant unit have common Directors hence it cannot be said that the applicant unit was not aware of the fact that the supplier unit has not paid the duty - No financial hardship has been pleaded assessee directed to make pre-deposit

Summary

Issues:
- Waiver of pre-deposit of duty, interest, and penalty based on availed cenvat credit.
- Allegation of suppression of facts with intent to evade payment of duty.
- Applicability of previous case law on the current case.
- Common directorship between supplier and applicant affecting awareness of duty payment.

Analysis:
The applicant sought waiver of pre-deposit of duty, interest, and penalty amounting to Rs.2,74,349/- after the demand was confirmed due to denial of cenvat credit. The case revolved around the purchase of duty paid grey fabrics from M/s. Natraj Processors, who subsequently cleared the goods without paying duty, leading to an investigation revealing the discrepancy. The applicant argued that since credit was based on invoices showing duty payment by M/s. Natraj Processors, the denial of credit was unjustified, citing a previous Tribunal decision. However, the Revenue contended that the common directorship between the supplier and applicant implied awareness of the duty status, alleging suppression of facts to evade payment.

The presiding officer noted that the applicant indeed availed credit based on invoices from M/s. Natraj Processors, who did not pay duty at the time of clearance. Despite the subsequent payment of duty by M/s. Natraj Processors in 2007 following a Revenue demand, the initial credit utilization in 2004 was based on unpaid duty. The officer distinguished the present case from the precedent cited by the applicant, emphasizing the common directorship as a crucial factor affecting the applicant's knowledge of the duty status. Financial hardship was not pleaded, leading to the conclusion that the duty waiver was not justified.

In the final decision, the Tribunal directed the applicants to deposit the duty amount of Rs.2,74,349/- within six weeks, with the waiver of pre-deposit for interest and penalty, and a stay on recovery during the appeal's pendency. The judgment highlighted the importance of actual duty payment at the time of credit availing, emphasizing the need for compliance with tax regulations despite subsequent rectifications by the supplier. Compliance reporting was set for a specific date to ensure adherence to the Tribunal's directives.