Cenvat credit and pre-deposit: area-based clearance and VAT invoice endorsement could not justify denial without merits review.

Rule 12 of the Cenvat Credit Rules, 2004 preserves Cenvat credit for clearances made under Notification No. 33/99-C.E., so such clearances are not to be treated as exempted goods; the pre-deposit direction was therefore unjustified. An invoice endorsement required for compliance with Rule 32 of the Assam Value Added Tax Rules, 2005 could not be imported into central excise proceedings to deny Cenvat credit on excise duty paid goods; the denial of credit on that basis was unsustainable. The order dismissing the appeal for non-compliance with pre-deposit was set aside and the matter was remanded for decision on merits without insisting on pre-deposit.

---

---

Issues: (i) Whether the requirement of pre-deposit was justified when the appellant relied on Rule 12 of the Cenvat Credit Rules, 2004 and the nature of clearances under Notification No. 33/99-C.E. dated 8-7-1999; (ii) Whether the endorsement on the invoices could be used to deny Cenvat credit when it was traced to compliance under Rule 32 of the Assam Value Added Tax Rules, 2005.

Issue (i): Whether the requirement of pre-deposit was justified when the appellant relied on Rule 12 of the Cenvat Credit Rules, 2004 and the nature of clearances under Notification No. 33/99-C.E. dated 8-7-1999.

Analysis: Rule 12 of the Cenvat Credit Rules, 2004 specifically provides that clearances made under Notification No. 33/99-C.E. dated 8-7-1999, under which duty paid out of PLA is refunded, are not to be treated as exempted goods and Cenvat credit on such inputs remains admissible. The Commissioner (Appeals) did not take this statutory position into account while directing deposit of Rs. 20 lakhs. In view of this, the appellant had a strong prima facie case against insistence on pre-deposit.

Conclusion: The pre-deposit direction was unjustified.

Issue (ii): Whether the endorsement on the invoices could be used to deny Cenvat credit when it was traced to compliance under Rule 32 of the Assam Value Added Tax Rules, 2005.

Analysis: The endorsement was explained as a requirement under Rule 32 of the Assam Value Added Tax Rules, 2005 relating to VAT invoices. An administrative clarification had also recorded that the endorsement was linked to Assam VAT compliance. Such an endorsement could not be imported into central excise proceedings to deny Cenvat credit of excise duty paid on the same goods. The appeal below had not been examined on merits.

Conclusion: The endorsement could not be relied upon to deny Cenvat credit.

Final Conclusion: The order dismissing the appeal for non-compliance with pre-deposit was set aside, and the matter was remanded for decision on merits without insisting on pre-deposit.

Ratio Decidendi: Where the governing credit rule expressly preserves Cenvat credit for clearances under the specified area-based exemption notification, and the disputed invoice endorsement arises from a separate VAT compliance requirement, insistence on pre-deposit and denial of credit are unsustainable without merits-based adjudication.

---