This appeal filed by the assessee is directed mainly against a demand of interest on CENVAT credit of Rs. 6,82,965/- which was utilized by the appellant for pre-deposit pursuant to Stay Order Nos. 1020 & 1021/2007, dated 20-12-2007 passed by this Tribunal in Appeals Nos. E/830 & 831/2007. The said two appeals had been filed against a total demand of duty of Rs. 13,13,394/- which had arisen out of classification of the appellants' product under SH 6806.90 of the first schedule to the Central Excise Tariff Act. The appellant (assessee) had classified the goods under SH 6807.10 of the said schedule and claimed the benefit of 'nil' rate of duty prescribed under Notification No. 3/2005-C.E. In the said Stay Order, this Tribunal directed pre-deposit of Rs. 6,82,965/- being 50% of the duty demanded. The appellant debited this amount in their CENVAT account on 10-3-2008 and reported compliance to the Tribunal. Later on, the above two appeals along with two other appeals of the assessee came to be disposed of by Final Order Nos. 1345 to 1348/2009, dated 22-9-2009 [2010 (251) E.L.T. 389 (T)]. The decision was in favour of the assessee on the classification dispute and consequently they got the benefit of the aforesaid notification. Against the decision, the Commissioner of Central Excise, Hyderabad filed Civil Appeal No. D16732/2010 but same was dismissed by the Hon'ble Supreme Court by order dated 9-7-2010.

2. During the pendency of the appeals E/830 & 831/2007 ibid, the Additional Commissioner of Central Excise, Hyderabad-IV issued show-cause notice dated 4-3-2009 to the assessee proposing to recover from them an amount of Rs. 6,82,965/- which was alleged to have been irregularly availed in CENVAT account and utilized for pre-deposit purpose. The notice also sought to levy interest under Section 11AB of the Central Excise Act read with Rule 14 of the CENVAT Credit Rules, 2004. It also proposed penalty under Rule 15(1) of the CCR, 2004 for the alleged contravention of legal provisions. All these proposals were contested by the party. In adjudication of the dispute, the Additional Commissioner passed the following order :

"I confirm and demand, interest on the CENVAT credit of Rs. 6,82,965/- availed irregularly under Section 11AB of the Central Excise Act, 1944.

I impose a penalty of Rs. 6,82,965/- on M/s. Minwool Rock Fibres Ltd. under Rule 15 of the CENVAT Credit Rules, 2004.".

Aggrieved by the above order, the party preferred an appeal to the Commissioner (Appeals) and the latter reduced the quantum of penalty to Rs. 50,000/- but sustained the demand of interest. The appellate authority directed the lower authority to "calculate" the period for levy of interest. The present appeal of the assessee is directed against the appellate Commissioner's order.

3. Heard both sides. The learned counsel for the appellant has cited decisions of this Tribunal recognizing debit in CENVAT account as a valid mode of pre-deposit. These decisions are also seen cited in ground No. A5 of the appeal. The learned counsel further submits that the pre-deposit made by the appellant by way of debit in CENVAT account was accepted by this Tribunal and accordingly their appeal was taken up for hearing on merits. The respondent did not raise any objection either at the stay stage or at the final hearing stage of the appeal. They did not raise such objection before the Hon'ble Supreme Court either. According to the learned counsel, it was not open to the department to issue the show-cause notice in question as it was barred by judicial discipline. For these reasons, it is argued that the subsequent proceedings of the department are also liable to be set aside.

4. The learned Additional Commissioner (AR) points out that the appellant was not entitled to avail or utilize CENVAT credit inasmuch as they were always manufacturing and clearing exempted final product only. Where the law barred the benefit of CENVAT credit, it was not open to the appellant to utilize CENVAT