By TIOL News Service

MUMBAI, JUNE 14, 2016: THE appellants have six factories, located at, among other places, in Thane and Hyderabad. The factory at Thane failed to pay a part of the duty amounting to Rs.1,92,64,263/- in the month of January 2013. Thereafter, they paid Central Excise duty in cash on each clearance after 7th of March 2013.

In the month of March 2013, the request of the appellant to get all the factories centrally registered as LTU was approved. As a result, CENVAT credit available in various factories was combined into one account. Large amount of credit available in the Hyderabad factory became available for payment of duty at Thane factory. The appellants deposited the short payment of duty of their Thane unit, that is an amount of Rs.1,92,64,293/- through their common LTU CENVAT account on 26/03/2013. They paid the interest of Rs.4,56,009/- in cash.

The revenue was of the view that the reversal of the credit made in the CENVAT account in the month of March was not a proper payment of duty and hence the default which started in January, continued.

Accordingly, a demand notice under rule 8 (3A) of CER, 2002 was issued in respect of entire clearances from 26.03.2013 to 31.12.2013. An amount of Rs.31,85,56,189/- was demanded to be paid in cash.

The Commissioner confirmed the demand.

The appellant filed an appeal before the CESTAT. However, they did not make any pre-deposit as mandated under Section 35F of the CEA, 1944 and, therefore, a notice for maintainability was issued by the Registry.

Before the CESTAT, the appellant pleaded that they have paid the entire amount from their CENVAT account and hence hundred percent of the duty demanded stands paid and in the circumstances they are not required to deposit any additional amount, i.e. amount required under Section 35F.

The CESTAT observed -

"8. The circular of the CESTAT issued on 28.08.2014 practically equates the cash payment of duty with the debits made in the CENVAT Registers. The said circular will apply to normal situations where the debit through CENVAT itself is not under challenge, as it is in impugned case. The impugned order disallows the debit in CENVAT and does not recognize it as payment of duty. The crux of the issue is validity of debits made in the CENVAT account as against demand of payment in cash. The whole purpose of Section 35F is to ensure that the order issued by various authorities are complied with, at least in part, before the appeal against the same is entertained. The entire dispute in the case relates to the incorrectness of the utilisation of the amount used from CENVAT account. The order of the Commissioner clearly does not recognize the payments made through said account and orders payment in cash. In view of the fact that the Rule 8(3A) as well as the order of the Commissioner clearly distinguishing between the payment in cash with payment through CENVAT, the same can not be equated."

The Bench, therefore, held that the appeal was liable to be dismissed as non-maintainable for lack of compliance of requirement of Section 35F. However, in the interest of justice, the CESTAT granted four weeks time to pay 7.5% of the disputed amount and report compliance.

We reported this order dated 23.09.2015 as - 2015-TIOL-2177-CESTAT-MUM .

The applicant has filed a Miscellaneous application for relief u/r 41 of the CESTAT (Procedure) Rules, 1982 seeking direction of the Tribunal to permit re-credit of the duty paid through the CENVAT Credit Account.

Again, the appellant relied on the CESTAT Circular dated 28.08.2014, the Board Circular no. 984/8/2014 dated 16.09.2014& some decisions of High Courts & Tribunals, all of which were distinguished by the Bench.

After considering the submissions made by both sides, the CESTAT observed –

"4. We have gone through the rival submissions. We find that the issue in short is if the deposit made under section 35F can be considered as duty payment against the clearance of goods made earlier. It is noticed that the provisions of refund in respect of duty and in respect of pre-deposit are substantially different. As regards refund of pre-deposit made under section 35F is concerned, it is covered by section 35FF. The said deposits do not take the shape of duty till such time the same are adjusted against confirmed duties. So far as refund of duty is concerned, the same is governed by section 11B and the provisions for the interest and refund are significantly different. The Circular dated 16.09.2014 in para 5 prescribes the procedure for refund of pre-deposit as follows:-

x x x

Thus it can be seen that the law treats the pre-deposits differently from the duty. In these circumstances it cannot be said that more than 100% duty has been deposited. In the case Narmada Offshore and Technical Services the difference between the duty and deposit was not brought to the notice of the Bench…."

The Miscellaneous application was dismissed.

(See 2016-TIOL-1421-CESTAT-MUM)