2013 (10) TMI 1046 - HC - Central Excise

100% EOU Cenvat credit as per Rule 3(7)(a) of CE Rules Waiver of Pre-deposit - Revenue was of the view that the appellant was required to take credit calculated in terms of Rule 3(7)(a) of the Credit Rules as prevalent during the period Held that - The contentions raised by the appellant prima facie raise an inference that there is an arguable point, particularly, when the account books and documents were audited and checked in 2008 by the respondent-Department and no discrepancy was detected - The question whether the respondents are justified in invoking the extended period of limitation, is a matter to be determined in appeal - the question whether the appellant has suppressed facts from the Department or evaded payment of duty, are other factors that would require consideration by the Tribunal - the appellant directed to deposit 50% of the amount of duty as pre-deposit upon such submission rest of the duty to be waived till the disposal Partial stay granted.

Summary

Issues:
- Appellant's challenge to the order of the Customs, Excise and Service Tax Appellate Tribunal regarding the recovery of duty and penalty.
- Eligibility of the appellant to avail Cenvat credit under Rule 3(7)(a) of the Cenvat Credit Rules, 2004.
- Financial distress of the appellant and the request for dispensation of pre-deposit condition.
- Time-barred nature of the demand raised by the revenue.
- Consideration of extended period of limitation and the validity of the order declining relief under Section 25-F of the Act.

The appellant challenged the order of the Customs, Excise and Service Tax Appellate Tribunal, which disposed of the stay application and directed the appellant to pay the entire amount of duty along with interest, with a stay on penalty only upon compliance. The appellant, engaged in manufacturing HDPE fabric/bags, availed Cenvat credit on duties paid on inputs. The Department found discrepancies in the credit availed, leading to a demand of Rs.35,01,028/- along with interest and penalty. The Tribunal held the appellant ineligible for full credit under Rule 3(7)(a) of the Credit Rules, directing deposit of duty with interest for stay of penalty.

The appellant, citing financial distress, requested a 50% deposit instead of the entire amount, challenging the time-barred nature of the demand due to the audit in 2008. The appellant argued that the extended period of limitation invoked by the show cause notice was unwarranted. The respondent contended no financial hardship was found, and the appellant was not entitled to claim Cenvat credit. The Tribunal's order declining relief under Section 25-F of the Act was deemed legal.

Upon review, the Court found arguable points in the appellant's contentions, especially regarding the audit in 2008 and the extended period of limitation. The Court opined that the Tribunal should have considered factors like suppression of facts or duty evasion by the appellant. Consequently, the Court directed the appellant to deposit 50% of the duty within a month, with a stay on the recovery of the remaining amount and interest upon compliance, granting relief to the appellant concerning the demand determined by the respondents.