Preventive CENVAT restriction may follow prima facie knowing credit misuse without waiting for final adjudication.

Notification No. 32/2006-C.E. (N.T.) was treated as a preventive and deterrent mechanism, so restriction of the monthly duty payment facility and CENVAT credit utilisation could be sustained on prima facie material showing knowing involvement in wrongful credit availment. The High Court noted that the department had detected duplicate credit, recorded statements, issued notice, and granted hearing, and that payment after detection did not undo the violation for notification purposes. Final adjudication or proof of immediate revenue loss was not required before imposing the restriction, provided the prescribed procedure was followed. The writ petition therefore failed and the restriction order was upheld.

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Issues: Whether the restriction order suspending the facility of monthly payment of duty and utilisation of CENVAT credit under Notification No. 32/2006-C.E. (N.T.) could be sustained on the basis of prima facie material showing knowing involvement in wrongful availment of credit, and whether the absence of final adjudication or immediate revenue loss barred such action.

Analysis: The Court noted that the departmental authorities detected a duplication of credit and recorded statements, after which the petitioner paid the amount involved. The notification was treated as a preventive and deterrent measure, not as a recovery or compensatory levy. On the material available, the authority had recorded reasons for a prima facie finding that the assessee was knowingly involved in the offence. The procedure contemplated by the notification had been followed, including notice and opportunity of hearing. The pendency of adjudication did not preclude the imposition of restrictions, and payment after detection did not erase the violation for the purpose of the notification.

Conclusion: The restriction order was valid and did not warrant interference.

Final Conclusion: The writ petition failed, and the impugned order restricting the CENVAT credit facility for the specified period was sustained.

Ratio Decidendi: A preventive restriction under the notification may be imposed on prima facie satisfaction of knowing involvement in duty evasion, after observance of the prescribed procedure, without waiting for final adjudication.

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