Tribunal grants full waiver of CENVAT Credit pre-deposit and penalty under Rule 15(2)

The Tribunal granted a total waiver of pre-deposit of CENVAT Credit amounting to Rs.4.35 crores and an equal penalty imposed under Rule 15(2) of Cenvat Credit Rules, 2004. The applicant, facing challenges due to exempted products in manufacturing, was allowed to opt for Clause (ii) of Sub-Rule (3) of Rule 6 despite initial data unavailability. The recovery was stayed during the appeal process based on the Tribunal's decision considering a similar case by the Larger Bench.

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Issues:
Waiver of pre-deposit of CENVAT Credit and penalty under Rule 15(2) of Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Waiver of pre-deposit of CENVAT Credit and penalty
The case involved an application for waiver of pre-deposit of CENVAT Credit amounting to Rs.4.35 crores and an equal penalty imposed under Rule 15(2) of Cenvat Credit Rules, 2004. The applicant, engaged in manufacturing finished goods, faced challenges due to the emergence of exempted products during the manufacturing process. The applicant sought to exercise an option under Clause (ii) of Sub-Rule (3) of Rule 6 of Cenvat Credit Rules, 2004, to pay an amount equal to the CENVAT Credit attributable to inputs used in exempted finished goods. The Revenue contended that once the applicant paid a percentage of the price of exempted goods at the beginning of the financial year, they could not switch to Clause (ii) within the same year. However, the applicant argued that due to non-availability of data, they were unable to exercise the option initially and later applied following the required procedure under Sub-Rule 3A. The Tribunal, considering the Larger Bench's decision in a similar case, held that the applicant had a prima facie case for waiver of pre-deposit, allowing a total waiver of dues adjudged against them and staying the recovery during the appeal's pendency.

In conclusion, the Tribunal found that the applicant's inability to exercise the option initially due to data unavailability did not disentitle them from later opting for Clause (ii) of Sub-Rule (3) of Rule 6 of Cenvat Credit Rules, 2004. The Tribunal granted a total waiver of pre-deposit of dues adjudged against the applicant and stayed the recovery during the appeal process.

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