2016 (7) TMI 1338 - AT - Central Excise

CENVAT credit - Rule 8(3A) of the Central Excise Rules, 2002 - assessee has defaulted in payment of duty - Held that - although there is a violation of Rule 8(3A) of Central Excise Rules, 2002 but the duty along with interest has been paid by the appellant, therefore, the appellant is entitled to avail Cenvat credit - demand of duty with interest not sustainable - there is procedural lapse on the part of the appellant, therefore, a penalty of ₹ 5,000/- is imposed on the appellant u/r 27 of the CER, 2002 - appeal allowed - decided partly in favor of assessee.

Summary

Issues:
Appeal against demand of duty, interest, and penalty for violation of Rule 8(3A) of the Central Excise Rules, 2002.

Analysis:
The appellant appealed against an order confirming the demand of duty, interest, and a penalty of ?50,000 for violating Rule 8(3A) of the Central Excise Rules, 2002. The case involved a default in duty payment by the appellant during a specific period, leading to the issuance of a show cause notice. The notice stated that due to the default, the appellant was not entitled to use Cenvat credit for duty payment and had to pay duty on a consignment basis through PLA. Subsequently, proceedings were initiated against the appellant resulting in the denial of Cenvat credit, confirmation of duty demand with interest, and imposition of a penalty. The appellant contended that although there was a procedural violation, they eventually paid the duty along with interest, hence should not be denied Cenvat credit or penalized under Rule 25.

During the proceedings, the appellant's counsel argued that the delayed duty payment was rectified with interest, indicating only a procedural violation, not warranting denial of Cenvat credit or penalty under Rule 25. Conversely, the respondent's representative supported the impugned order, emphasizing the applicability of Rule 8(3A) due to the appellant's delayed duty payment. After hearing both sides, the tribunal carefully considered the submissions.

The tribunal observed that the appellant indeed failed to pay duty on time during the specified period, triggering the application of Rule 8(3A), which mandated duty payment through PLA on a consignment basis without utilizing Cenvat credit. However, as the appellant eventually paid the overdue duty with interest, the tribunal held that despite the rule violation, the appellant could avail Cenvat credit. Consequently, the demand for duty along with interest was deemed unsustainable. Additionally, acknowledging a procedural lapse by the appellant, a penalty of ?5,000 was imposed under Rule 27 of the Central Excise Rules, 2002.

In conclusion, the appeal was disposed of with the imposition of a reduced penalty and the appellant being allowed to avail Cenvat credit after rectifying the delayed duty payment.