2014 (8) TMI 138 - AT - Central Excise

Utilization of ineligible CENVAT Credit - default in terms of Rule 8(3A) - Interest - Penalty u/s 11AC - excise duty beyond the permissible period of time of 30 days - Utilization of credit after permissible period - Held that - If the duty liability is not discharged by the due date and the default continues for period of 30 days from the due date, the appellant is prohibited from utilizing the CENVAT Credit for the purpose of payment of duty in respect of the subsequent clearances. In view of this legal provision, the appellant could not have utilized CENVAT Credit to the extent confirmed in the impugned order. Therefore, the appellant has not made out a case for waiver of pre-deposit as prayed in the stay petition. Accordingly, we direct the appellant to make a pre-deposit of ₹ 55,04,474/- in cash within a period of four weeks and report compliance by 24.7.2014. On such payment in cash, the appellant would also be entitled to take equivalent credit in their CENVAT Credit account. On such compliance, the pre-deposit of balance of dues adjudged shall stand waived and recovery thereof stayed during the pendency of the appeal - Conditional stay granted.

Summary

Issues:
1. Confirmation of Central Excise duty demand for ineligible CENVAT Credit utilization.
2. Imposition of interest and penalties under Section 11AC of the Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002.
3. Applicability of Rule 8(3A) regarding utilization of CENVAT Credit during default period.
4. Requirement of pre-deposit for waiver in the stay petition.

Analysis:
1. The judgment pertains to an appeal against an Order-in-Original confirming a Central Excise duty demand of Rs. 55,04,474/- for the period June, 2012 to December, 2012 due to the improper utilization of CENVAT Credit for goods clearance. The Commissioner imposed penalties and interest totaling Rs. 1,19,12,357/- each under Section 11AC of the Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002.

2. Despite the appellant's absence, the Addl. Commissioner (AR) argued that the case involved non-payment of excise duty beyond the allowed 30-day period, leading to the duty demand, interest, and penalties. Citing precedents from the Hon'ble High Courts of Karnataka and Madras, it was highlighted that during a default period, utilizing CENVAT Credit is impermissible, and goods must be cleared by paying duty in cash.

3. The Tribunal acknowledged the legal position established by the High Courts that in case of non-payment of duty within 30 days from the due date, the appellant is prohibited from using CENVAT Credit for subsequent duty payments. Consequently, the appellant's request for a waiver of pre-deposit was denied, and they were directed to deposit Rs. 55,04,474/- in cash within four weeks. Compliance would allow the appellant to take equivalent credit in their CENVAT account, with the remaining dues being waived and their recovery stayed during the appeal's pendency.

4. The judgment underscores the importance of adhering to statutory provisions regarding the utilization of CENVAT Credit and the consequences of non-compliance with duty payment timelines. The decision serves as a reminder of the legal obligations imposed on taxpayers in the context of Central Excise regulations and the repercussions of improper credit utilization during default periods.