Cenvat credit earned later cannot discharge duty on earlier clandestine removals; balance duty must be paid through PLA.

Credit under Rule 3(3) of the Cenvat Credit Rules, 2002 can be used only to the extent available for the relevant duty period, so credit earned after removals cannot be applied to clearances alleged to have occurred earlier. Where duty is said to arise from clandestine removals made before the credit accrued, a later debit in the Cenvat account does not constitute valid discharge of that duty. The balance duty therefore had to be paid through PLA, after which the earlier Cenvat debit could be reversed. The amount deposited towards penalty was treated as sufficient for pre-deposit under Section 35F.

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Issues: Whether Cenvat credit debited after the clearance of goods could be treated as valid payment of duty for clearances alleged to have been made before such credit was earned.

Analysis: Rule 3(3) of the Cenvat Credit Rules, 2002 permits utilization of credit only to the extent available for the relevant duty period, and credit earned subsequently cannot be used for removals effected earlier. Where the revenue case is that duty became payable on clandestine removals made before the credit accrued, a later debit from the Cenvat account does not amount to proper discharge of the duty liability. The balance duty was therefore required to be paid through PLA, while the earlier debit could be reversed after such payment. The amount deposited towards penalty was treated as sufficient for the purpose of pre-deposit under Section 35F.

Conclusion: The debit entry in the Cenvat account was held insufficient for discharge of the confirmed duty liability, and the assessee was directed to pay the balance duty through PLA.

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