Cenvat credit utilisation: duty demand fails when sufficient aggregate credit exists across inputs and capital goods accounts.

Where an assessee maintains separate Cenvat credit accounts for inputs and capital goods, duty payment cannot be treated as short paid merely because the debit appears in the inputs register if sufficient eligible aggregate credit was available in both accounts. The relevant rules permitted utilisation of Cenvat credit for duty discharge, and the record showed that the total credit balance exceeded the credit actually used. On that basis, the duty demand and penalty were unsustainable, and the short-payment finding was set aside in favour of the assessee.

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Issues: Whether the duty demand and penalty could be sustained on the footing that the assessee had utilised more Cenvat credit than was available in the inputs credit account, without taking into account the capital goods credit also lying in balance.

Analysis: The relevant rules permitted utilisation of Cenvat credit for duty payment, and the record showed that the assessee maintained separate accounts for inputs and capital goods credit. The total credit available in both accounts on the material dates was more than the credit actually used for payment of duty. Mere debit entries in the inputs register did not justify a conclusion that the assessee had short paid duty when the capital goods credit balance was also available and undisputed.

Conclusion: The demand of duty and the penalty could not be sustained; the finding of short payment was set aside in favour of the assessee.

Final Conclusion: The appeals succeeded and the impugned orders were overturned because the assessee had sufficient aggregate credit to meet the duty liability.

Ratio Decidendi: Where the assessee has sufficient eligible Cenvat credit in the relevant accounts, duty payment cannot be treated as short payment merely because the debit was reflected in one register and not another.

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