CENVAT credit restrictions upheld where clandestine removal without invoices and duty payment was prima facie established.

Rule 12CC of the Central Excise Rules, 2002 and Rule 12AA of the CENVAT Credit Rules, 2004 permit deterrent restrictions, including withdrawal of monthly duty payment facilities and limits on CENVAT credit use, where a manufacturer is prima facie involved in evasion-related conduct. On the facts, interception of goods without invoice, stock shortages, and admissions by responsible persons of clearance without duty payment were sufficient to invoke the notification issued under those rules. The withdrawal of the facility and the restriction on utilization of CENVAT credit were therefore upheld as lawful deterrent measures.

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Issues: Whether the withdrawal of the facility of monthly payment of excise duty and the restriction on utilization of CENVAT credit were valid where clandestine removal of excisable goods without invoice and without payment of duty was prima facie established.

Analysis: Rule 12CC of the Central Excise Rules, 2002 and Rule 12AA of the CENVAT Credit Rules, 2004 empower the Central Government to prescribe deterrent restrictions, including withdrawal of facilities, where a manufacturer is prima facie found to be knowingly involved in evasion-related acts. The notification issued under those rules authorized withdrawal of facilities and restriction on payment of duty through CENVAT credit when goods are removed without invoice or without payment of duty. The record showed interception of goods without invoice, shortages in stock, and admissions by responsible persons of clearance of goods without duty payment, which was sufficient to attract the notification and the enabling rules.

Conclusion: The withdrawal of the facility and the restriction on utilization of CENVAT credit were upheld as a lawful deterrent measure, and the challenge failed.

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