2006 (8) TMI 457 - AT - Central Excise

Summary

Issues:
1. Appeal against the impugned order passed by the Commissioner (Appeals) setting aside the interest and penalty levied.
2. Interpretation of Rule 8 of Central Excise Rules, 2002 and Rule 3(4) of Cenvat Credit Rules, 2002 regarding payment of duty on goods removed from the factory or warehouse.
3. Application of Section 11AB of the Act in demanding interest on delayed payment of duty.
4. Impact of the substitution of sub-rule (4) of Rule 3 of Cenvat Credit Rules, 2002 effective from 1-3-2003 on the payment of duty.

Analysis:
1. The appeal before the Appellate Tribunal CESTAT, Mumbai involved a dispute over the interest and penalty levied by the Revenue on the assessee. The Commissioner (Appeals) had set aside the Order-in-Original that imposed interest of Rs. 24,189/- and penalty of Rs. 8,000/-, ruling in favor of the assessee.

2. The core issue revolved around the interpretation of Rule 8 of Central Excise Rules, 2002 and Rule 3(4) of Cenvat Credit Rules, 2002 concerning the payment of duty on goods removed from the factory or warehouse. The Commissioner (Appeals) highlighted that Rule 8 mandates duty payment by the 5th of the following month for all goods removed, without differentiating between goods manufactured by the assessee and those on which Cenvat credit was availed.

3. The application of Section 11AB of the Act in demanding interest on delayed payment of duty was scrutinized. The Commissioner (Appeals) emphasized that interest is payable from the first date of the month succeeding the month in which the duty should have been paid, refuting the Revenue's calculation of interest from the date of clearance.

4. The impact of the substitution of sub-rule (4) of Rule 3 of Cenvat Credit Rules, 2002 effective from 1-3-2003 was deliberated. The substitution deleted specific language related to the date of duty payment upon removal of inputs/capital goods, leading to ambiguity regarding the timing of duty payment. The Tribunal referenced precedents to support the position that in cases where duty payment is made on a monthly basis, as in the present case, interest and penalty may not be sustainable.

In conclusion, the Appellate Tribunal upheld the Commissioner (Appeals)'s decision, rejecting the Revenue's appeal and allowing the cross-objections filed by the assessee, emphasizing the clarity and application of the law in determining the liability for duty payment and interest calculation.