Excess duty paid through Cenvat credit account cannot support a demand when liability was already discharged in full

When inputs are cleared as such, reversal under the Cenvat Credit Rules must match the credit availed, but a demand is not sustainable where the assessee has already paid more than the amount legally due, even if the excess payment was made through the Cenvat account rather than in cash. The Tribunal held that the excess debit could not be treated as wrongly utilised credit merely because of the mode of payment, and it was unnecessary to probe motive for the overpayment. It also noted that Section 11D of the Central Excise Act, 1944 was not attracted on the facts. The impugned demand, including interest, was set aside.

---

---

Issues: Whether the demand could be sustained when the assessee had reversed/payably debited more credit than was required on clearance of inputs as such, and had consequently paid duty in excess of the statutory requirement, along with a small amount of short payment arising from the earlier method followed.

Analysis: The dispute arose from the amendment to Rule 3(3) of the Cenvat Credit Rules, 2002, which required reversal equal to the credit availed when inputs were removed as such. The assessee had, in certain cases, debited more than what was legally due through the Cenvat account. The demand authorities treated the excess debit as wrongly utilised credit and also confirmed a small short-payment demand, together with interest under Section 11AB of the Central Excise Act, 1944. The Tribunal held that where more duty had already been paid than necessary, it was not proper to sustain a demand merely because the payment was made through the Cenvat account rather than cash, and it was unnecessary to examine alleged motives for the excess debit. The Tribunal also noted that Section 11D of the Central Excise Act, 1944 was not attracted on the facts.

Conclusion: The demand was not sustainable and the impugned order was set aside in favour of the assessee.

Ratio Decidendi: A duty demand cannot be sustained where the assessee has already paid more than the amount legally payable on clearance of inputs as such, merely because the excess payment was made through the Cenvat credit account.

---