2016 (12) TMI 1111 - AT - Central Excise

CENVAT credit - credit of duty paid by the assessee during pendency of appeal, and taking suo-muto credit under intimation to revenue on being successful in appeal - the suo motu taking credit of Cenvat credit debited in excess due to clerical mistake, whether the same is in violation of the provisions of the Act and the Rules? - Held that - the issue is no longer res-integra and this issue have been considered by Hon ble Karnataka High Court in the case of Commissioner of Central Excise, Bangalore-III Vs Motorola India Pvt. Ltd. 2006 (7) TMI 223 - HIGH COURT OF KARNATAKA AT BANGALORE , wherein under similar facts and circumstances, where the assessee had debited excess Cenvat credit and sought permission of revenue for taking re-credit by correcting the error, but was advised to apply for refund. When such refund claim was made, the same was rejected as time-barred. The Hon ble High Court held that the contention of the assessee that the amount paid by mistake is not duty, merits consideration. In fact, duty paid on goods is indicated in the invoices. Therefore, there is no question of time bar. The amount paid should be considered as deposit and not duty. Further, on going through the relevant provisions of Rule 12 of CCR, 2002 or Rule 14 of CCR, 2004 which provides for recovery of Cenvat taken wrongly or erroneously, does not call for any recovery of Cenvat credit taken of an amount of pre-deposit made during pendency of appeal, taken suo motu. Thus, I hold that the show cause notices in both the matters are misconceived. Accordingly, the impugned orders are set aside - appeal allowed - decided in favor of assessee.

Summary

Issues involved:
1. Whether taking suo-motu Cenvat credit during the pendency of appeal and re-crediting after success in appeal violates the provisions of the Act and Rules.
2. Whether taking suo-motu credit of Cenvat credit debited in excess due to clerical mistake is in violation of the Act and Rules.

Issue 1: Taking suo-motu Cenvat credit during appeal and re-crediting after success in appeal

The case involved an appeal by an appellant against a show cause notice by the Revenue proposing a different classification for the appellant's products and demanding Excise Duty. During the appeal, the appellant debited an amount but succeeded in the appeal, leading to re-credit of the debited amount. The Tribunal upheld the appellant's classification, stating that no duty was payable on the disputed products. The issue was whether this re-crediting was in violation of the Act and Rules. The Tribunal referred to a similar case decided by the Hon'ble Karnataka High Court, where it was held that the amount paid by mistake should be considered a deposit, not duty, and there was no question of time bar for refund claims. The Tribunal concluded that the show cause notices were misconceived, setting aside the impugned orders and allowing the appeals of the assessee while dismissing the appeal of the Revenue.

Issue 2: Taking suo-motu credit of Cenvat credit debited in excess due to clerical mistake

In another case, the appellant had erroneously debited excessive duty in their Cenvat account, which was later realized and re-credited suo-motu. The Revenue objected, claiming a violation of Rule 9 of Cenvat Credit Rules, 2004, and demanded the re-credited amount under Rule 14 of the same rules. The Tribunal considered the issue and cited the decision of the Hon'ble Karnataka High Court, emphasizing that recovery of Cenvat credit taken wrongly or erroneously does not apply to amounts pre-deposited during the appeal process and re-credited suo-motu. The Tribunal held that the show cause notices were misconceived, setting aside the impugned orders and allowing the appeals of the assessee while dismissing the appeal of the Revenue. The assessees were entitled to consequential benefits in accordance with the law.

This judgment clarifies the legality of taking suo-motu Cenvat credit during the pendency of an appeal and re-crediting after success, as well as the re-crediting of Cenvat credit debited in excess due to a clerical mistake. The Tribunal's decision was based on precedent and the interpretation of relevant rules, ultimately providing relief to the appellants in both cases.