2007 (7) TMI 546 - AT - Central Excise

Demand - Default in fortnightly payment of duty - Held that - the payment by Cenvat credit is as good as payment by debiting account current and that the appellants have not violated the direction for which they have been held accountable under the impugned order - appeal allowed.

Summary

Issues:
1. Whether payment made from Cenvat credit account instead of cash for consignmentwise payment under Rule 173G constitutes a violation of duty payment requirements.
2. Interpretation of utilizing Cenvat credit for duty payment as equivalent to debiting account current.
3. Validity of the impugned order confirming duty demand and imposing a penalty.

Analysis:
1. The issue before the Appellate Tribunal was whether the appellants' payment from the Cenvat credit account, instead of cash, for consignmentwise payment under Rule 173G amounted to a violation of duty payment obligations. The Department contended that the payment should have been made in cash, leading to the adjudicating Commissioner confirming a duty demand of Rs. 51,91,466/- and imposing a penalty of Rs. 1.00 lakh on the appellant, a Public Sector Unit.

2. The appellant's advocate relied on the decision of the Hon'ble High Court of Bombay in Lloyds Steel Industries v. Union of India, where it was held that using Cenvat credit for duty payment is equivalent to debiting the account current. The Tribunal, after considering this argument, found merit in the submissions made by the advocate. Following the precedent set by the Bombay High Court, the Tribunal concluded that payment through Cenvat credit is in compliance with the duty payment requirements, akin to debiting the account current. Therefore, the Tribunal held that the appellants had not violated the direction and set aside the impugned order.

3. Ultimately, the Tribunal, in its decision, set aside the impugned order confirming the duty demand and penalty, based on the interpretation that utilizing Cenvat credit for duty payment is as valid as making payment by debiting the account current. The appeal was allowed in favor of the appellants based on the application of the legal principle established by the Hon'ble High Court of Bombay, providing a clear justification for the reversal of the initial decision.