2014 (11) TMI 824 - HC - Central Excise

Waiver of pre-deposit - Wrongful availment of CENVAT Credit - Held that - The proceeding was initiated on an allegation that the petitioners have not done any manufacturing activities and there was a wrongful availment of the Cenvat credit. It does not admit any debate that the Cenvat credit is as good as cash provided the same is availed in the manner permissible under the relevant rules and the statute. It is no doubt true that the statement of the persons made before the authority if adversely affect the interest of the assessee, the authority must provide an opportunity to the assessee to cross-examine the same witness. This plea appeared to have been taken by the petitioners before the original authority as well as appellate authority. The said authorities did not find any substance therein. However, the matter is at large before the Tribunal where the Tribunal shall consider all the factual aspects at the time of deciding the appeal finally. The Tribunal found that the petitioners have been able to make out an arguable case and have granted waiver to the extent of 75% so far as it relates to the demand and 90% of the penalty imposed on the director of the company and a total waiver of the statutory penalty. Such discretion cannot be said to be perverse and so unreasonable that it cannot be allowed to stand for a moment - Decide against assessee.

Summary

Issues:
Challenge to order of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on waiver of pre-deposit condition.

Analysis:
The petitioners challenged the CESTAT's order directing them to deposit 25% of the demand and 10% of the personal penalty. The petitioners argued that they had paid an excess amount than the demand mentioned in the show cause notice. The Department alleged illegal availment of Cenvat credit due to the petitioners' lack of manufacturing activity. The petitioners contended that most persons involved corroborated their statements, except for a few. They argued that the person whose statement went against them should have been cross-examined. The authorities initiated proceedings against the petitioners based on the alleged wrongful availment of Cenvat credit. The Court concurred with the respondent's submission that the core issue was the petitioners' lack of manufacturing activities, leading to the wrongful availment of Cenvat credit. The Tribunal found the petitioners had made an arguable case and granted a waiver of 75% of the demand and 90% of the penalty imposed on the director, along with a total waiver of the statutory penalty.

The Court emphasized that Cenvat credit, if availed properly, is akin to cash. It noted that the petitioners' manufacturing activities were a crucial factual issue to be decided by a fact-finding authority. The Tribunal's discretion in granting the waiver was considered reasonable and not perverse. The Court cautioned against interfering with discretionary orders unless they were irrational, unreasonable, or shockingly against judicial conscience. The writ petition was disposed of with no order as to costs.