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2014 (10) TMI 20 - AT - Central ExciseRestriction on utilization of CENVAT Credit - Default in payment of duty - Rule 8(3A) of CER, 2002 - Held that - The provisions of sub-rule 8 (3A) was introduced to curb the tendency on the part of assessees in defaulting in payment of duty and the language used in the said Rule, especially the use of non-obstante clause makes it absolutely clear that during the period of default, the assessee cannot utilize the credit lying in the Cenvat Credit account for the purpose of payment of excise duty. The decision of the Hon ble Bombay High Court in the case of Lloyds Steel Industries Ltd had dealt with a different situation prevailing under Rule 49 of the Central Excise Rules, and the language used therein was also different. Therefore, the ratio of the said decision cannot apply in the present case. On the other hand the decision of the Hon ble High Court of Karnataka in the case of Manjunatha Industries case and the Hon ble High Court of Madras in Unirols Airtex case are directly on the issue and interprets Rule 8 (3A) by stating that utilization of Cenvat Credit during default period is an exercise in nullity. Therefore, the claim of the appellant that the reversal of Cenvat Credit of ₹ 74,45,393/- confirmed by the adjudicating authority is not correct in law, prima facie is not sustainable. - stay granted partly.
Issues:
Appeal against duty demand confirmation under Rule 8 (4) of Central Excise Rules, 2002 read with Section 11 of Central Excise Act, 1944 - Dispute over utilization of Cenvat Credit - Applicability of Rule 8(3A) of Central Excise Rules, 2002 - Interpretation of High Court decisions regarding Cenvat Credit utilization during default period. Analysis: The judgment pertains to an appeal and stay petition challenging an order confirming a duty demand against the appellant under Rule 8 (4) of the Central Excise Rules, 2002 read with Section 11 of the Central Excise Act, 1944. The appellant, a printing and packaging company, defaulted in payment of excise duty from April 2012 to February 2013. The appellant contended that the adjudicating authority did not consider the full amount paid by them and wrongly denied Cenvat Credit of &8377; 74,45,393/-, citing a High Court decision in Lloyds Steel Industries Ltd. vs. UOI. The appellant argued they should only be liable to pay &8377; 51,95,736/- for the default period, promising to pay if granted time. The revenue, represented by the Additional Commissioner, argued that Rule 8(3A) of the Central Excise Rules, 2002 mandates cash payment of duty if default exceeds thirty days, disallowing Cenvat Credit utilization during the default period. Citing the High Court decisions in Unirols Airtex vs. CCE and Manjunatha Industries vs. CCE, the revenue contended that Cenvat Credit cannot be utilized as a matter of right during default, emphasizing that the entire outstanding amount must be paid. The judgment highlighted the necessity of discharging the defaulted payment in cash as per the clear provisions of Rule 8(3A), supported by the legal interpretations in the mentioned High Court cases. The Tribunal, after considering both parties' submissions, analyzed the applicability of Rule 8(3A) and the interpretations provided by the High Courts in Unirols Airtex and Manjunatha Industries cases. The Tribunal emphasized that during a default period, the assessee cannot utilize the Cenvat Credit for duty payment, as explicitly stated in Rule 8(3A). The Tribunal distinguished the situation in the Lloyds Steel Industries Ltd. case, stating that its ratio does not apply in the present matter. Consequently, the Tribunal found the appellant liable to pay the balance amount of &8377; 1,26,31,129/-, subject to verification of the amount already paid. The Tribunal directed the appellant to make a pre-deposit within eight weeks, with non-compliance leading to the waiver of interest and penalty, and a stay on recovery during the appeal's pendency.
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