Cenvat credit recovery can proceed after notice and adjudication when credit is alleged to be wrongly availed or utilised.

Cenvat credit alleged to have been wrongly availed or utilised may be recovered by the department under Section 11A of the Central Excise Act read with Rule 12 of the Cenvat Credit Rules, but only through the prescribed notice and adjudication process. The Kerala HC accepted that, where the department forms the view that credit cannot be used against the basic excise duty on the final product, recovery proceedings are legally available after notice, objections and a reasoned order by the competent authority. The writ petition was disposed of on that basis.

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Issues: Whether the department could initiate recovery proceedings and issue notice where Cenvat credit was alleged to have been wrongly availed and utilized against the basic excise duty on the final product.

Analysis: The credit dispute arose in the context of the retrospective amendment to Rule 3 of the Cenvat Credit Rules, which governed utilization of credit of additional duty of excise. The Court held that if the department formed the view that credit had been wrongly availed or could not be utilized against the basic excise duty on the final manufactured product, it was entitled to proceed for recovery. Such action was stated to be available under Section 11A of the Central Excise Act, read with Rule 12 of the Cenvat Credit Rules, and only after notice, objections, and a reasoned order by the competent authority.

Conclusion: The department was held entitled to initiate proceedings for recovery in accordance with law, and the writ petition was disposed of on that basis.

Ratio Decidendi: Where Cenvat credit is alleged to have been wrongly availed or utilized, the department may proceed under Section 11A of the Central Excise Act, 1944 and Rule 12 of the Cenvat Credit Rules, 2004 after following the prescribed notice and adjudication procedure.

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