Court sets aside order for 50% deposit, deems it double payment, directs expedited appeal hearing

The court set aside the appellate order requiring the petitioner to deposit 50% of the Cenvat credit amount and penalty, ruling that further payment would amount to double payment. The court dispensed with the pre-deposit requirement, directing the appellate authority to hear the appeal within two months. The writ petition was allowed without costs, emphasizing the need for a fair hearing and examining the petitioner's entitlement to Cenvat credit.

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Issues involved:
The issues in this case involve alleged contravention of Rules 4 and 6 of the Cenvat Credit Rules, disallowance of Cenvat credit, initiation of penal proceedings, and the validity of the order passed by the appellate authority regarding pre-deposit of tax.

Contravention of Cenvat Credit Rules:
The petitioner, engaged in the business of purchase and sale of vehicles and other goods, was issued a show cause notice alleging contravention of Cenvat Credit Rules for availing credits before the payment of Service Tax. The notice proposed to disallow a specific amount under the Rules and initiate penal proceedings. The matter was adjudicated, confirming the demand. The petitioner appealed against this order, seeking waiver of pre-deposit of tax.

Validity of Order on Pre-deposit:
The appellate authority directed the petitioner to deposit 50% of the Cenvat credit amount and penalty imposed, failing which the appeal would be rejected. The petitioner challenged this order, arguing that further payment would amount to double payment. The respondents contended that the order was discretionary and justified, given the alleged violations by the petitioner.

Resolution:
After hearing both sides and examining the records, the court considered whether the petitioner was entitled to Cenvat credit. The respondents claimed the credit was availed before tax payment, while the petitioner asserted full tax payment. The court, in the interest of justice, set aside the appellate order, dispensed with the pre-deposit requirement, and directed the appellate authority to hear the appeal within two months. The writ petition was allowed, and no costs were awarded.

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