Cenvat credit recovery against a dealer: interim protection granted where recovery provisions were tied to the manufacturer.

Wrongful Cenvat credit in respect of duty-paid inputs was discussed with reference to Rule 12 of the CENVAT Credit Rules, 2002, which treats recovery of wrongly utilised credit as recoverable from the manufacturer together with interest, with Sections 11 and 11AB of the Central Excise Act, 1944 applying mutatis mutandis. On that basis, immediate recovery against the dealer was not treated as warranted for interim purposes. Interim protection was granted, and deposit of the disputed duty and penalty was dispensed with until further orders.

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Issues: Whether, in a proceeding involving a dealer, recovery of alleged wrongful Cenvat credit and the related duty and penalty could be enforced against the dealer, and whether interim protection from deposit was warranted.

Analysis: The order records that the appellant was a dealer and that the inputs had already suffered Central Excise duty. It was noted that, under Rule 12 of the CENVAT Credit Rules, 2002, wrongful utilisation of Cenvat credit is recoverable from the manufacturer, together with interest, and that the recovery machinery under Sections 11 and 11AB of the Central Excise Act, 1944 applies mutatis mutandis. On that basis, the demand was not treated as immediately recoverable from the dealer for the purpose of interim relief.

Conclusion: Interim protection was granted and the duty and penalty were dispensed with till further orders, in favour of the assessee.

Ratio Decidendi: Where Cenvat credit is alleged to have been wrongly taken or utilised in respect of inputs duty-paid at the earlier stage, interim recovery is to be examined with reference to the recovery provision that applies to the manufacturer under the governing Cenvat Credit Rules.

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