2013 (11) TMI 383 - AT - Central Excise

Cenvat credit as per Rule 3 (7)(a) of CE Rules - 100% EOU - Notification No. 23/2003 Reversal of Cenvat credit - Extended Period of Limitation Waiver of Pre-deposit - Revenue contended that the appellants are required to reverse the entire credit - Held that - In terms of Rule 3(7)(a) the appellants are not eligible for availing credit to entire duty paid by the supplier of the goods - The appellants are disputing the demand only on the ground of limitation - Commissioner (Appeals) has examined the issue of time limitation and has held that that extended period is invokable - Prima facie, the appellants do not have a strong case on merit - the appellants directed to deposit the entire duty along with interest upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues:
1. Eligibility of Cenvat credit availed by the appellant.
2. Grounds for seeking waiver of pre-deposit and stay of recovery.
3. Applicability of the extended period for demand.

Analysis:

Issue 1: Eligibility of Cenvat credit availed by the appellant
The appellant, engaged in manufacturing HDPE fabric/bags, availed Cenvat credit on duty paid for inputs procured from an EOU. The department found the appellant availed full credit under Section 3(1) of the Act, read with Notification No. 23/2003-CE. The appellant was required to take credit as per Rule 3(7)(a) of the Cenvat Credit Rules. The appellant claimed it was a bona fide mistake to avail full credit. The Revenue argued that the appellant was not eligible for full credit as per the rules. The Tribunal noted that the appellant was not entitled to full credit under Rule 3(7)(a) and disputed the demand based on limitation.

Issue 2: Grounds for seeking waiver of pre-deposit and stay of recovery
The appellant sought waiver of pre-deposit and stay of recovery of the amount and penalty imposed. The appellant claimed that the mistake was unintentional and was rectified upon discovery. The appellant argued that the audit party did not highlight the issue earlier. The Revenue contended that the extended period was applicable and the entire credit should be reversed. The Tribunal acknowledged the appellant's argument but found that the extended period was invokable based on the Commissioner (Appeals) decision. The Tribunal directed the appellant to deposit the entire duty with interest within a specified time, with a stay on the penalty upon compliance.

Issue 3: Applicability of the extended period for demand
The Commissioner (Appeals) had examined the issue of time limitation and concluded that the extended period was applicable. The Tribunal, after considering both sides, found that the appellant did not have a strong case on merit. The Tribunal directed the appellant to deposit the duty with interest within a specified time frame, with a stay on the penalty upon compliance. The compliance deadline was set for a future date.

In summary, the Tribunal upheld the decision that the appellant was not eligible for full credit under the Cenvat Credit Rules, acknowledged the appellant's argument for waiver of pre-deposit, but found the extended period applicable for demand. The Tribunal directed the appellant to deposit the duty with interest within a specified time, with a stay on the penalty upon compliance.