2008 (9) TMI 219 - HC - Central Excise

Retrospective Amendment: AED Credit Rules Clarified

The court ruled that the retrospective amendment to the Cenvat Credit Rules allowed for the utilization of Additional Excise Duty (AED) paid on inputs for ... Recovery - If the Department is of the opinion that the petitioner has wrongly availed of a credit, or that the petitioner is not entitled to avail of the same against the basic excise duty, Department is entitled to proceed against the petitioner and seek recovery of amount due from the petitioner - coercive proceedings against the petitioner in respect of the said amount shall obviously be taken only after a notice is issued, objections invited and an order is passed u/s 11A Issues:1. Interpretation of Cenvat credit rules regarding the utilization of Additional Excise Duty (AED) on raw materials for final products.2. Whether retrospective amendment to Cenvat Credit Rules allows utilization of AED paid on inputs for basic excise duty on final products.3. Entitlement of Department to recover wrongly availed credits under Central Excise Act and Cenvat Credit Rules.Analysis:1. The judgment revolves around the interpretation of Cenvat credit rules concerning the utilization of Additional Excise Duty (AED) paid on raw materials for the final products. The petitioner, a tyre manufacturer, argued that the Finance Act of 2004 allowed Cenvat credit for AED paid on inputs in relation to basic excise duty on final products. The issue arose whether the credit for AED taken prior to the amendment could be used for basic excise duty payment before the change brought by the Finance Act 2004.2. The retrospective amendment to Rule 3 of the Cenvat Credit Rules clarified that the credit of AED paid on inputs after April 1, 2000, could be utilized for excise duty on final products. The petitioner contended that since the payment for AED on raw materials occurred after April 1, 2000, they should still be entitled to take credit for AED paid on inputs for discharging basic excise duty on tyres. However, the Department disagreed, indicating that the petitioner may not avail of the credit for basic excise duty on final products.3. The judgment highlighted the Department's entitlement to recover wrongly availed credits under the Central Excise Act and Cenvat Credit Rules. The court emphasized that if the Department believes the petitioner wrongly availed credits or is not entitled to use them for basic excise duty on final products, they can proceed to seek recovery under Section 11A of the Central Excise Act along with Rule 12 of the Cenvat Credit Rules. The Department was directed to follow due process, issue notices, invite objections, and pass orders before initiating coercive recovery proceedings against the petitioner. The writ petition was disposed of, emphasizing the procedural requirements for recovery actions.