Suo motu credit taken which was not available to assessee – due to financial hardship only 25% pre-deposit of total duty ordered

PJ/Case Laws/2011-12/1453

Case: M/s BALLARSHAH PLYWOIOD Vs COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation: 2011-TIOL-1523-CESTAT- MUM

Issue:- Suo motu credit taken which was not available to assessee – due to financial hardship only 25% pre-deposit of total duty ordered.

Brief Facts:- Appellant are manufacturers of plywood. They defaulted in making monthly payment of duty for the period from 20.01.2006 to 19.04.2006 and they paid the duty along with interest on 6.9.2007 and 7.9.2007. Since they defaulted for a period more than 30 days, the monthly payment facility was withdrawn under Rule 8(3A) of the Central Excise Rules, 2002 with effect from 20.01.2006 to 19.03.2006. However, during the said period the appellant had taken and utilized CENVAT credit amounting to Rs.7,39,067/-.

A show-cause notice dated 6.2.2007 was issued and adjudicated wherein a demand for Rs. 7,39,067/- was confirmed and a penalty for an equivalent amount was imposed. Subsequent to the passing of the order, the appellant paid this amount with interest.

In appeal, the Commissioner (Appeals) vide order dated 19.02.2008 confirmed the duty and reduced penalty. In the meanwhile, appellant took CENVAT credit of Rs. 7, 39,067/- suo motu in the month of September, 2007 which was earlier wrongly paid by them through CENVAT credit amount and of goods in the month of September, 2007.

Since the appellants availed credit suo motu, a show-cause-notice was issued on 15.09.2008 proposing recovery of amount of Rs. 7, 39,067/- under Rule 14 of the Cenvat Credit Rules read with Section 11A of the Central Excise Act, 1944 with interest under Section 11AB of the said Act and also proposed imposition of penalty under Rule 15 of the Cenvat Credit Rules.

Vide order-in-original dated 12.05.2009, all the demands were confirmed and penalty of Rs. 10, 000/- was imposed.

In appeal, the Commissioner (Appeals) vide stay order dated 24.09.2009 directed the appellant to make a pre-deposit of 100% of the CENVAT credit amount demanded. Appellant did not comply with the direction of the pre-deposit and the appeal was dismissed by the impugned order for non-compliance of the conditions mentioned in the stay order.

Appellants are before the Tribunal against the impugned order.

Appellant’s Contention:- Appellant submits that they had taken CENVAT credit suo motu as they had paid the duty amount in cash subsequently and therefore, the CENVAT credit was rightly entitled to them. Since they were rightly entitled for the credit, they have not caused any loss of revenue to the exchequer.

Appellant further pleads that they are in grave financial difficulties and are finding it extremely difficult to meet the day today expenditure of the running the factory. It is for this reason that they were unable to make the pre-deposit as ordered by the Lower Appellate Authority.

Respondent’s Contention:- Revendue submits that it is a settled position in law that the assessees cannot take suo motu CENVAT credit, when the case was pending before the Appellate Authority, and in the case of disputed credit, CENVAT credit has to be allowed by the Competent Authority. Therefore taking of suo motu credit and utilizing the same is clear contravention of the law.

Reasoning of Judgment:- The Tribunal held that it is a settled position in law that the assessee cannot take suo motu credit of CENVAT credit disallowed to them unless and until a finding has been given by the competent authority that they are entitled for the credit. In the instant case, even before the Appellate Authority passed the order, appellant took suo motu credit of the CENVAT credit which was not permissible under the law. Considering the fact that the appellant is facing grave financial hardship and also keeping in mind the interest of revenue, the Tribunal directed the appellant to make a pre-deposit of 25% of the CENVAT credit amount of Rs.7,39,067/- within stipulated time. On such compliance, pre-deposit of the balance amount of dues adjudged shall stand waived and recovery thereof stayed.

As the case has been dismissed not on merits but for non-compliance of the stay order, the Tribunal set aside the impugned order and remands the case back to the lower appellate authority for decision on merits in accordance with the law after giving a reasonable opportunity to the appellant to make their submissions.

Decision:- Appeal and stay application disposed of accordingly.

Comments

PJ/Case Laws/2011-12/1453

Post a Comment

Query