2006 (1) TMI 425 - AT - Central Excise

Summary

Issues:
1. Appellants availing Cenvat credit and fortnightly payment of duty during 2000-01.
2. Forfeiture of fortnightly payment facility due to default in duty payment.
3. Department objecting to duty payment through debit in Cenvat account.
4. Imposition of penalty under Rule 25 of Central Excise Rules, 2002.
5. Appeal against penalty reduction from Rs. 6,45,117 to Rs. 1,00,000.
6. Interpretation of Rule 8 of Central Excise Rules, 2002 for duty payment modes during forfeiture period.
7. Comparison of legal precedents on duty payment modes during forfeiture.
8. Discretion exercised by original authority and Commissioner (Appeals) on penalty reduction.
9. Consideration of High Court judgments on mandatory nature of Rule 8 and penalty imposition.

Analysis:
1. The appellants, engaged in paper manufacturing, were availing Cenvat credit and fortnightly duty payment. Default in duty payment led to forfeiture of the fortnightly payment facility. The department objected to duty payment through debit in Cenvat account, issuing a show cause notice for duty payment from PLA and proposing a penalty under Rule 25 of Central Excise Rules, 2002.

2. The appellants argued that Rule 8 allowed duty payment modes during forfeiture, citing a Bombay High Court case. They claimed no intent to evade duty, referencing a Chennai Bench decision. They also relied on a Madras High Court judgment regarding duty payment before adjudication.

3. The Joint CDR opposed, citing another Bombay High Court case disallowing debit in Cenvat account during forfeiture. The reduction of penalty by the Commissioner (Appeals) was defended as leniency. The value of legal precedents and pending appeals were discussed.

4. The judgment emphasized the mandatory nature of Rule 8, citing the gravity of non-compliance from a High Court case. The penalty imposition and reduction were evaluated, with the discretion of lower authorities deemed reasonable and exemplary.

5. Legal precedents were reviewed, distinguishing the present case from cited judgments. The sustained penalty of Rs. 1,00,000 was upheld, dismissing the appeal. The decision was based on the specific circumstances and legal interpretations presented during the case.