2013 (10) TMI 1381 - AT - Central Excise

Summary

Issues Involved:
1. Whether the appellant was required to pay duty in cash for all clearances during the period of withdrawal of the facility of fortnightly payment.
2. Validity of utilizing Cenvat/Modvat credit during the suspension period.
3. Applicability of interest and penalty for non-cash payment during the suspension period.

Summary:

Issue 1: Payment of Duty in Cash During Suspension Period
The core dispute was whether the appellant was required to pay duty in cash for all clearances during the period when the facility of fortnightly payment was withdrawn. The Assistant Commissioner of Central Excise had withdrawn this facility without issuing a show-cause notice, mandating the appellant to pay duty on each removal of excisable goods during the suspension period. The appellant paid the duty partly through the Modvat Account and partly in cash via the Personal Ledger Account (PLA).

Issue 2: Utilization of Cenvat/Modvat Credit
The department contended that the appellant was not entitled to use Cenvat/Modvat credit during the suspension period and that duty should have been paid entirely in cash. The Tribunal referred to the Larger Bench ruling in Noble Drugs Ltd. v. Commissioner of Central Excise, Nashik, which held that prior to 31-3-2005, an assessee could discharge duty liability either through PLA or by utilizing Cenvat credit during the forfeiture period. This was supported by the Hon'ble Kerala High Court's observation that the situation was revenue-neutral, as the credit lying in the account was the duty already paid on inputs.

Issue 3: Interest and Penalty
The Tribunal noted that the non-obstantive clause in sub-rule 3A of Rule 8, effective from 1-4-2005, changed the scenario by mandating cash payment during the suspension period. However, for the period before this amendment, as per the ruling in Noble Drugs Ltd., the appellant could utilize Cenvat credit for duty payment without attracting interest and penalty u/s 11AB read with Section 11AC of the Central Excise Act.

Conclusion
The Tribunal concluded that, in light of the jurisdictional ruling of the Hon'ble Bombay High Court, the appellant was entitled to pay duty by both debit to PLA and Cenvat/Modvat account during the suspension period prior to 1-4-2005. Consequently, the appeal was allowed with consequential relief in accordance with law.

(Dictated and pronounced in Court)