2017 (6) TMI 149 - AT - Central Excise

Pre-deposit - Section 35F of the CEA, 1944 - irregular availment of CENVAT credit - Held that - The Section 35F mandates that pre-deposit amounting to 7.5% is required to be paid in the case of first appeal - almost the entire part of the CENVAT credit alleged to have been wrongly taken, stands reversed. Hence, the requirement of Section 35F is fully satisfied and there will be no need for the appellant to pay any further amounts to satisfy the mandatory requirements of Section 35F - the appellant has satisfied the requirements of Section 35F - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Original disallowing CENVAT credit, Compliance with mandatory pre-deposit under Section 35F, Interpretation of CENVAT Credit Rules, Consideration of excise duty payments at the time of clearance, Applicability of CBEC circular on pre-deposit requirements.

Analysis:
1. The appellant filed appeals against an Order-in-Original disallowing CENVAT credit wrongly availed, amounting to ?3,39,84,531. The Commissioner ordered recovery under Rule 14 of CENVAT Credit Rules 2004. The appellant sought a stay without mandatory pre-deposit of 7.5% under amended Section 35F. The Tribunal's interim order directed compliance with the pre-deposit requirement, leading to an appeal to the High Court of Kerala.

2. The High Court set aside the order, remitting the matter to the Tribunal for de novo consideration. The appellant contended that the tubes and flaps procured from outside were duty paid items, and CENVAT credit was availed as inputs. The Revenue argued against their classification as inputs or accessories, leading to a demand for reversal of CENVAT credit through show-cause notices.

3. The appellant argued that the duty paid on tubes and flaps was included in the total value of cleared tyres, resulting in the reversal of credit at clearance. Chartered Accountant certificates were submitted to support the duty payments. The appellant also referenced a CBEC circular allowing payments made during investigation or audit to be considered as deposits under Section 35F.

4. The appellant's plea against the mandatory pre-deposit order was based on the contention that the duty payments at clearance should be considered as fulfilling the pre-deposit requirement. The Tribunal considered the appellant's submissions, noting that the duty payments effectively reversed the alleged irregularly taken credit, satisfying Section 35F.

5. The Tribunal held that the appellant had met the requirements of Section 35F, as almost the entire disputed credit had been reversed at clearance. Therefore, no further payment was necessary to comply with the mandatory pre-deposit. The appeals were directed to be listed for further proceedings.