2015 (1) TMI 129 - AT - Central Excise

Utilization of CENVAT Credit - credit availed during the next period utilized for duty of the previous period - one-to-one correlation - Held that - When there is no one to one correlation between the output and the input for the purpose of utilization of CENVAT credit and in the absence of specific provision denying the utilization of CENVAT credit during the default period, in case of default by the appellant in monthly payment, utilization of CENVAT credit during the next month for payment of duty relating to the previous month cannot be faulted with. Needless to say the interest is liable to be paid and appellants have apparently paid the interest for delayed payment next month. At best it can be said that availment of CENVAT credit in the subsequent month is a procedural violation since strictly going by the law, credit could not have been used. - Utilization of credit allowed. As regards penalty, there is no doubt that there is a default in making payment on monthly basis. Further the benefit of BIFR decision also in my opinion is not applicable to the assessee. This is because while BIFR had allowed them to pay the principal in installment over a period of 7 years and had waived interest and penalty, the appellants have chosen to pay the entire amount and take the CENVAT credit back in 2008 itself. Therefore appellants themselves have not availed the benefit extended by BIFR which apparently is due to the fact that by that time BIFR passed the order extending the benefit, the financial position of the appellant had improved and they were in a position to pay the amount. Similarly for payment of interest also, no waiver was available. Since the appellants have not availed the order of the BIFR as regards principal, obvious conclusion is that there was no need for the same. The principal and interest and statutory liability and the same crystallised in the year 2008 and the same was discharged. Therefore I do not think that the benefit of waiver of penalty in terms of BIFR order can be extended to the appellant. - However, penalty reduced - Decided partly in favour of assesse.

Summary

Issues:
1. Demand under Section 11A of CEA, 1944 with Rule 3(3) of CENVAT Credit Rules
2. Penalty reduction by Commissioner
3. Interest on irregular utilization of credit
4. Utilization of CENVAT credit for duty liability under Rule 8 of Central Excise Rules, 2002

Analysis:
1. The appeal involved issues concerning a demand of Rs. 44,78,549 under Section 11A of CEA, 1944 along with Rule 3(3) of the CENVAT Credit Rules. The dispute revolved around the utilization of CENVAT credit earned in subsequent months to discharge duty liability for earlier periods.

2. The penalty of Rs. 10 lakhs, initially imposed, was reduced by the Commissioner. The appellant company, registered under BIFR, faced challenges in sustaining itself during the relevant period due to defaults in duty payments.

3. Interest was held as payable on the irregular utilization of a credit amounting to Rs. 44,78,549. The appellant had paid back the entire credit before the hearing of the stay petition, which led to a series of petitions and applications to address the penalty and interest issues.

4. The Tribunal dismissed the Revenue's application for appeal dismissal and allowed the appellant's application for staying the demand of interest on duty, subject to a penalty deposit. The Tribunal considered the payment and restoration of the credit amount, emphasizing the accounting treatment and the legality of taking credit suo motu in certain circumstances.

5. The Tribunal's decision was supported by precedents where similar cases had been considered, highlighting the procedural aspects and the applicability of CENVAT credit rules. The High Court's ruling further reinforced the permissibility of recrediting CENVAT accounts without requiring a refund claim.

6. The Tribunal's final decision, pronounced in 2014, emphasized that interest need not be paid by the appellant, but a reduced penalty of Rs. 1,00,000 was deemed appropriate due to the default in monthly payments. The BIFR scheme's benefits were not extended to the appellant as they had already paid the principal amount and restored the CENVAT credit without availing the BIFR's waiver of interest and penalty.

7. Ultimately, the Tribunal decided that while interest was not payable, a reduced penalty of Rs. 1,00,000 was imposed, considering the appellant's actions and the BIFR scheme's non-applicability due to the appellant's improved financial position by the time of payment.