Cenvat credit adjustment rule cannot support recovery beyond available credit unless expressly authorised

Rule 9(2) of the Cenvat Credit Rules, 2002 was construed as permitting only deduction of the determined credit from the existing credit balance and lapse of any excess credit. Where the manufacturer's available credit was less than the amount determined, the rule contained no express mechanism to recover a further sum. In the absence of specific statutory authority for additional recovery, the demand was held unsustainable.

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Issues: Whether Rule 9(2) of the Cenvat Credit Rules, 2002 authorises recovery of an amount equivalent to the credit determined thereunder when the credit balance already available with the manufacturer is less than that amount.

Analysis: The Rule was construed as providing only for deduction of the amount determined under it from the credit balance and for lapsing of any excess credit. The Tribunal followed the earlier view that the Rule does not create any express mechanism for recovering an additional sum where the credit already standing in the account is insufficient. In the absence of specific statutory authority for such recovery, no further demand could be sustained.

Conclusion: Rule 9(2) did not permit recovery of any amount beyond the credit balance available, and the demand was unsustainable.

Ratio Decidendi: A credit-adjustment rule cannot be used to compel recovery of an additional amount unless the rule expressly authorises such recovery.

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