By TIOL News Service

MUMBAI, JUNE 30, 2015: AGAINST an order passed by the CCE, Thane-II on 23.12.2014, the appellant has filed an appeal before the CESTAT.

This is what the adjudicating authority held -

"ORDER

(i) I disallow the CENVAT Credit of Rs.5,63,66,047/- (Rupees Five Crores Sixty-three Lakhs Sixty-six Thousand Forty-seven only) availed and utilised by … during the period Aug-2009 to Sept-2012 and order recovery of the said amount under the provisions of Rule 14 of CENVAT Credit Rules, 2004 read with section 11A(10) [earlier section 11A(2)] of the Central Excise Act, 1944;

(ii) I determine an amount of Rs.1,18,45,107/- (Rupees One Crore Eighteen Lakhs Forty-five Thousand One Hundred Seven only), under Rule 14 read with Rule 6(3)(i) of the Cenvat Credit Rules, 2001 in [reading of Section 11A(10) and Station 11AA of the Central Excise Act, 1944; as payable by M/s. …;

(iii) I order that the amount of Rs.3,44,773/- (Rupees Three Lakh Forty Four Thousand Seven Hundred and Seventy Three only) already paid / reversed by …be appropriated against the amount determined as payable as above,

(iv) I order recovery of interest at appropriate rate on the amount ordered to be recovered at Sr. No. (i) above and also determined as payable at Sr. No. (ii) above under the provision of Rule 14 of the Cenvat Credit Rules, 2004 read with Section-11AA (earlier Section-11AB) of the Central Excise Act, 1944.

(v) I impose penalty of Rs.6,82,11,154/- (Rupees Six Crore Eighty Two Lakhs Eleven Thousand One Hundred and Fifty Four only), upon M/s. … under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

(vi) I impose penalty of Rs.70,00,000/- (Rupees Seventy Lakh only) upon Shri …, Managing Director of aforesaid M/s …, under rule 26(2)(ii) of the Central Excise Rules, 2002."

A SCN came to be issued by the Registry relating to maintainability of the appeal filed by the appellant since the appellant had not deposited 7.5% of the disputed demand of duty as prescribed by the amended provisions of Section 35F of the CEA, 1944.

When the matter was heard recently, the appellant, while justifying their non-making of any pre-deposit, submitted thus -

+ the demand consists of two portions, in the first portion, the department has proposed to disallow cenvat credit amounting to Rs.5,63,66,047/-. According to the appellant, the said amount has already been reversed by them while clearing the goods as such and hence they have already paid back the said amount.

+ the second contention is relating to the demand of Rs.1,18,45,107/-. They were manufacturing dutiable as well as exempted goods/trading and the department has demanded 6% on such exempted/trading activity; that they have already reversed Rs.3,44,773/- as a proportionate credit between the dutiable and exempted/trading goods.

The AR elucidated the issue involved thus -

+ What is being demanded is the cenvat credit availed by the appellant without receiving any goods in their factory and manipulating the documents so as to show that the goods have been received in the factory. He further submitted that the so called as reversal of the credit is irrelevant to the issue as the invoices have been issued in the name of various persons who, in turn, would have availed the credit. There is no evidence whatsoever that the goods have been received by the recipient of such invoices; that the payment of Rs.5,63,66,047/- at the time of purported clearance of input as such is of no relevance.

+ As far as the demand of Rs.1,18,45,107/- is concerned, the appellant has been doing trading activity in a big way and their manufacturing activity is only miniscule and as held by the Tribunal in Mercedes Benz - 2014-TIOL-476-CESTAT-MUM, before 2011 the value of the trading goods has to be taken. Even on that criteria, the demand will be substantial.

+ As per Section 35F, the appellant is required to deposit an amount equivalent to 7.5% of the duty demanded and it is clear from the order that only an amount of Rs.3,44,773/- can be taken into account for the said purpose.

The Bench extracted the provisions of s.35F of the CEA, 1944 (w.e.f 6.8.2014) and the ‘order' portion from the o-in-o and inter alia observed -

++ It will thus be seen that as far as the appellant is concerned, a demand of Rs.6,82,11,154/- has been confirmed. Further, an amount of Rs.3,44,773/- only has been appropriated.

++ We find force in the contention of the learned Commissioner (AR) that the purported reversal of credit of Rs.5,63,66,047/- cannot be considered, as the appellant has issued invoices and their customers would have already taken credit of the same. We find these issues will have to be gone into detail at the time of final hearing and cannot be decided at this stage.

The CESTAT noted that the appellant ought to have deposited 7.5% of the duty involved (minus the amount of Rs.3,44,773/- already reversed) but since the same was not done the appeal is not maintainable.

However, in the interest of justice, the Bench directed the appellant to pay the amount within a period of four weeks and report compliance, failing which,it was informed, that the appeal would be deemed to have been dismissed as non-maintainable due to non-compliance of the provisions of Section 35F of the CEA, 1944.

(See 2015-TIOL-1279-CESTAT-MUM)