By TIOL News Service

MUMBAI, DEC 07, 2013: CLAUSE (b) in sub-rule (1) of Rule 57AB of CER, 1944 read thus -

"(b) The CENVAT credit may be utilized for payment of any duty of excise on any final products manufactured by the manufacturer or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such."

Notification No. 48/2000-CE(NT) dated 18.8.2000 inserted the following proviso in clause (b) of sub-rule (1) of Rule 57AB:-

"Provided that while paying duty in the manner specified under sub-rule (1) of rule 49 or sub-rule (1) of rule 173G, as the case may be, the CENVAT credit shall be utilised only to the extent such credit is available on the fifteenth day of a month for payment of duty relating to the first fortnight of the month, and the last day of a month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by notification based on value of clearances in a financial year, for payment of duty relating to the entire month."

Incidentally, as per rule 173G of the erstwhile CER, 1944, the following was the procedure to be adopted by an assessee (other than a unit availing SSI exemption) while discharging duty liability in respect of clearance of excisable goods -

i. during the first fortnight of the month, by the twentieth day of that month;

ii. during the second fortnight of the month, other than the month of March, by the fifth day of the succeeding month, and

iii. during the second fortnight of March, by the 31 st day of the said March

In the present case, the assessee, a large scale unit, was required to discharge duty for the first fortnight by the twentieth of that month.

As per the amendment made to rule 57AB w.e.f. 18.8.2000, the assessee could utilize CENVAT Credit accrued upto 15 th of the month in respect of payment of duty for the first fortnight of the month.

The appellant had a balance of Rs.55,55,632/-on 15.8.2000. However, they utilized CENVAT Credit amounting to Rs.83,18,044/- for payment of duty for the first fortnight of August,2000. Thus, there was an excess utilization to the extent of Rs.27,62,412/-.

The adjudicating authority vide the impugned order held that the appellant is not eligible to utilize this excess credit for payment of duty for the first fortnight of the August, 2000 and appropriated the amount paid subsequently by the appellant and ordered recovery of interest @24% per annum on the said credit wrongly taken and also imposed penalty of Rs.5 lakhs on the appellant under Rule 173Q of Central Excise Rules, 1944.

The appellant is before the CESTAT.

It is inter alia submitted that amendment made by notification 48/2000-CE(NT) is effective only prospectively inasmuch as whatever credit had accrued prior to 18.8.2000 i.e. on 16 th & 17 th August,2000 could be utilized by the appellant for payment of duty for the first fortnight of August, 2000. Reliance is also placed on the decision in Agni Steels 2005(183)ELT35(T) .

The Revenue representative justified the order of the Commissioner.

The Bench observed -

+ In the present case, the appellant discharged the excise duty liability on 19.8.2000 i.e. after the amendment of Rule 57AB. Therefore, on the date of payment of duty i.e. on 19.8.2000 the position in law was that the appellant could have utilized credit earned upto 15.8.2000 for the payment of duty for the first fortnight of August, 2000 and, therefore, the adjudicating authority is correct in concluding that the appellant was not eligible for the credit earned on16th & 17th August, 2000 for payment of duty for the first fortnight of the month.

+ However, this amounts to only advance utilization of credit, inasmuch as there is no dispute that the appellant was entitled for the credit taken on 16th & 17th of August. For such advance utilization of credit, the appellant shall be liable to pay only interest on the credit utilized the credit earned on 16 th & 17 August, 2000 for payment of duty w.e.f. from 1.9.2000 onwards.

+ As the appellant has utilized the credit on 19.8.2000, the appellant is liable to pay interest on the wrong utilization for the period from 19.8.2000 to 31.8.2000. Since the rule provides for payment of interest @ 24%, the said rule shall apply. Therefore, the confirmation of interest for the period 19.8.2000 to 31.8.2000 is sustainable in law.

+ Since this is a case concerning interpretation of law, no penalty is warranted.

The appeal was disposed of in above terms.

(See 2013-TIOL-1819-CESTAT-MUM)