2014 (1) TMI 8 - AT - Central Excise

Ineligible cenvat credit - Inputs used for the manufacturing of final product Waiver of Pre-deposit Held that - The appellant considered their final product as liable for duty and paid the central excise duty on it and also availed the cenvat credit for the material period on the inputs on which central excise duty has been paid - If there is a discharge of duty liability, which is more than the cenvat credit availed - the appellant reversed the cenvat credit which is according to the first appellate authority is ineligible Following MAHINDRA AND MAHINDRA LTD. Versus COMMR. OF C. EX., MUMBAI-V 2010 (12) TMI 403 - BOMBAY HIGH COURT - the appellant has made out prima facie case for the waiver of the pre-deposit of the amounts - Application for the waiver of pre-deposit of the balance amounts allowed till the disposal - Stay granted.

Summary

Issues: Stay petition for waiver of pre-deposit of duty demand, penalty, and interest confirmed by the first appellate authority due to availing ineligible cenvat credit on inputs for manufacturing final product with nil rate of duty from June 2009 to August 2010.

Analysis:

1. The appellant sought a waiver of pre-deposit of confirmed amounts of duty demand, penalty, and interest by the first appellate authority. The appellant argued that they paid central excise duty on the final product, sulfur, during the relevant period, even though it was classified under a chapter with a nil tariff rate. The appellant contended that since they discharged more duty liability than the cenvat credit availed on inputs, it should be considered as a reversal of cenvat credit, citing a decision of the Hon'ble High Court of Mumbai in a similar case.

2. The Departmental Representative (D.R.) argued that the appellant's product was correctly classified under the chapter with a nil tariff rate, implying that no central excise duty should have been paid. Therefore, the appellant was not eligible to avail cenvat credit on inputs where the supplier had already paid central excise duty.

3. Upon considering both arguments, the Tribunal found the issue to be debatable. They noted that the appellant had considered their final product as dutiable, paid central excise duty on it, and availed cenvat credit on inputs where duty was paid. The Tribunal acknowledged the possibility that the appellant had effectively reversed the cenvat credit, which the first appellate authority deemed ineligible. Referring to a case from the Hon'ble High Court of Mumbai, the Tribunal concluded that the appellant had presented a case for the waiver of pre-deposit. Consequently, they allowed the application for the waiver and stayed the recovery of the balance amounts until the appeal's disposal.

4. In summary, the Tribunal granted the appellant's stay petition for the waiver of pre-deposit of duty demand, penalty, and interest amounts confirmed by the first appellate authority. The decision was based on the argument that the appellant had paid central excise duty on the final product and availed cenvat credit on inputs, potentially reversing the credit. The Tribunal found the issue to be arguable and relied on a precedent from the Hon'ble High Court of Mumbai to support their decision to allow the waiver and stay the recovery of the amounts involved until the appeal's resolution.