2009 (3) TMI 672 - AT - Central Excise

Summary

Issues: Duty payment default, utilization of Modvat credit, penalty imposition under Section 11AC

Duty Payment Default:
The judgment addresses the default in duty payment by the appellant, a small scale unit, during May 2007. It highlights that as per the provisions of Rule 8 of Central Excise Rules, 2002, duty was required to be paid by the 5th day of the following month. The appellant defaulted in payment, leading to the requirement of paying duty for each consignment at the time of removal without utilizing the Cenvat credit until the outstanding amount, including interest, was paid. The Commissioner (Appeals) confirmed a duty demand of Rs. 3,62,619/- against the appellant and imposed a penalty equivalent to the duty amount under Section 11AC of the Central Excise Act and Rule 25 of Central Excise Rules, 2002.

Utilization of Modvat Credit:
The judgment emphasizes that the appellant paid the duty out of their Modvat credit account instead of the PLA, which was not in accordance with the law. This action was deemed as if the goods were cleared without payment of duty, leading to the application of consequences and penalties as provided in the rules. The appellant was directed to deposit the duty amount within six weeks, and upon deposit, they could approach the Central Excise authorities for reversal of the entry in their Modvat credit account.

Penalty Imposition under Section 11AC:
Regarding the penalty, it was noted that the penalties provided in the Central Excise Rules would apply, not under Section 11AC as done by the Commissioner (Appeals). Rule 25 stipulates the imposition of a penalty not exceeding the duty amount. As the penalty was imposed under Section 11AC along with Rule 25 for 100% of the duty amount, it was directed that the appellant deposit Rs. 50,000/- towards penalty within six weeks. Compliance was to be ascertained on a specified date, subject to the appeal's final disposal.

This judgment underscores the importance of adhering to duty payment timelines, correct utilization of credit accounts, and the appropriate imposition of penalties in accordance with the relevant provisions of the Central Excise Rules. The decision provides clarity on the consequences of defaulting in duty payment and the subsequent actions required to rectify such non-compliance, emphasizing the legal obligations of the appellant in fulfilling their duty payment obligations and penalty liabilities.