CENVAT credit cutoff rules prevent later-accrued credit from clearing earlier central excise duty arrears.

A defaulting manufacturer could not clear prior fortnightly central excise arrears by using CENVAT credit earned after the relevant due date. Rule 173G required duty for each fortnight to be paid by the stipulated date, either through PLA debit or by utilising available CENVAT credit, while Rule 57AB limited such utilisation to credit available on the prescribed cut-off date for each fortnight. Credit accrued after that cut-off could not be applied retrospectively to an earlier defaulted period. The issue was therefore answered against the assessee.

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Issues: Whether a manufacturer who defaulted in payment of central excise duty for a prior fortnight could discharge the arrears by utilising CENVAT credit accrued after the due date instead of paying from PLA.

Analysis: Rule 173G required duty for each fortnight to be paid by the stipulated date and permitted discharge either by debit in PLA or by utilisation of CENVAT credit. Rule 57AB, through its proviso, restricted utilisation of CENVAT credit to the credit available on the fifteenth day of the month for the first fortnight and on the last day of the month for the second fortnight. On that scheme, credit earned after the relevant cut-off date could not be used for the duty period already defaulted. A defaulting manufacturer therefore could not later use subsequently accrued credit to clear the arrears for the earlier period.

Conclusion: The arrears could not be discharged from CENVAT credit accrued after the relevant due date, and the issue was answered against the assessee.

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