2006 (3) TMI 380 - AT - Central Excise

Issues:
1. Forfeiture of fortnightly payment facility and duty payment from PLA.
2. Validity of utilizing Cenvat credit for duty payment during forfeiture period.
3. Compliance with Rule 8(4) of the Central Excise Rules, 2002.
4. Demand of duty and penalty imposition.
5. Reduction of penalty amount based on circumstances.

Issue 1: Forfeiture of Fortnightly Payment Facility and Duty Payment from PLA:
The appellants defaulted duty payment for four consecutive fortnights, leading to forfeiture of the fortnightly payment facility by the Assistant Commissioner. The appellants were directed to pay duty from their Personal Ledger Account (PLA) for the defaulted periods. Subsequently, they debited an amount in their Cenvat account with the Commissioner's permission. However, a clarification later stated that arrears of duty cannot be paid through Cenvat account. Despite this, the appellants continued to pay duty from the Cenvat account, leading to a show cause notice demanding duty payment and penalty imposition. The Tribunal upheld the demand of duty for the defaulted period, emphasizing non-compliance with Rule 8(4) of the Central Excise Rules, 2002.

Issue 2: Validity of Utilizing Cenvat Credit for Duty Payment During Forfeiture Period:
The appellants argued that duty liability during forfeiture could be discharged by debiting the account-current or utilizing Cenvat credit, citing precedents and circulars. However, the Tribunal noted that the legislative intent behind Rule 8(4) mandated compliance with its provisions. The Tribunal highlighted that the appellants' failure to pay duty from PLA as directed was against the rule's mandate, leading to the sustained demand of duty for the specific period.

Issue 3: Compliance with Rule 8(4) of the Central Excise Rules, 2002:
Rule 8(4) specified the consequences of successive defaults in fortnightly duty payments, including forfeiture of the payment facility. The Tribunal emphasized that the appellants' repeated defaults led to the forfeiture order, making it mandatory to pay duty from the account-current. The Tribunal found the appellants' actions contrary to the rule's requirements, resulting in the upheld demand of duty for the defaulted period.

Issue 4: Demand of Duty and Penalty Imposition:
The original authority confirmed the duty demand and imposed a penalty on the appellants, which was upheld by the Commissioner (Appeals). The Tribunal, considering the circumstances and past defaults, set aside a portion of the duty demand related to a specific period. The penalty amount was reduced significantly, taking into account the appellants' permission to pay duty from Cenvat account during the forfeiture period, resulting in a modified order with reduced penalty.

Issue 5: Reduction of Penalty Amount Based on Circumstances:
The Tribunal reduced the penalty imposed on the appellants from Rs. 2 lakhs to Rs. 50,000, considering the reduction in the duty demand and the circumstances surrounding the duty payment during the forfeiture period. The Tribunal acknowledged the appellants' compliance with the Commissioner's permission for duty payment, leading to a reduced penalty amount in the final order.

In conclusion, the Tribunal partly allowed the appeal by modifying the impugned order, sustaining the demand of duty for the defaulted period while reducing the penalty amount based on the circumstances and compliance with the duty payment regulations.

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