Cenvat credit recovery barred where no operative machinery provision existed for 1999 clearances without duty payment.

For clearances made without payment of duty under Notification No. 10/97-C.E. during 1999, the Tribunal held that the Department could not recover 8% under Rule 57CC because the relevant period predated the explanatory provisions later inserted into Rule 6 of the Cenvat Credit Rules. The decision turned on the absence, at the material time, of a specific machinery provision defining the amount payable or prescribing the mode of recovery. Relying on the cited precedent and the later effective dates of the 2001 and 2002 insertions, the Tribunal held the demand unsustainable and allowed the appeals.

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Issues: Whether, for the period prior to the insertion of the explanatory provisions in Rule 6 of the Cenvat Credit Rules, the Department could recover 8% of the price under Rule 57CC of the Central Excise Rules, 1944 in respect of clearances made without payment of duty under Notification No. 10/97-C.E.

Analysis: The clearances were made during a period when the rules did not contain a specific machinery provision defining the amount payable or providing the mode of recovery. The Tribunal noted that the later insertions in Rule 6 of the Cenvat Credit Rules, 2001 and 2002 came into force only from 01.07.2001 and 01.03.2002 respectively, whereas the disputed periods were in 1999. Relying on the cited precedent and the absence of an operative recovery mechanism for the relevant period, the Tribunal held that the demand could not be sustained.

Conclusion: The demand of 8% under Rule 57CC was not recoverable for the relevant period and the appeals were to be allowed.

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