2010 (11) TMI 263 - AT - Central Excise

Stay Application - Demand - Wrongful availment of Cenvat credit - short payment - the facility of payment in instalments is done away with and apart from providing that the duty liability has to be discharged by the specified date the provisions of law clearly explain that it is only upon the discharge of duty liability as specified in the provision of law and the amount is credited to the account of the Central Government by the specified date that the assessee can avoid imposition of penalty - Therefore the arguments which are sought to be advanced with reference to the erstwhile provision of law rather than rendering any help to the appellants justifies the view that are taking in the matter. do not find any infirmity as such in the impugned order by the Commissioner. Detention of goods - As regards the detention of the goods undoubtedly the department is armed with the guidelines laid down by the Board but at the same time it is not the case of the Department that the assessee had been consistently in default in the past or that in the past the appellants have avoided to comply with the order passed by the Competent Authority. In such circumstances if the appellants want some breathing time to clear the goods certainly the request in that regard has to be considered.

Issues Involved:
1. Short payment of duty and related penalties.
2. Applicability of Rule 8(3A) of the Central Excise Rules, 2002.
3. Justification for the imposition of penalties.
4. Alleged undue haste by the department in enforcing recovery.
5. Detention of goods and its legality.

Issue-wise Detailed Analysis:

1. Short Payment of Duty and Related Penalties:
The appellants were found to have short paid duty for the period from July 2006 to October 2007. The Commissioner confirmed a demand for Rs. 6,40,802/- along with interest and an equal amount of penalty. Additionally, Rs. 1,52,17,438/- was ordered to be recovered due to wrongful availment of Cenvat credit, with penalties of Rs. 10,00,000/- and Rs. 50,000/- for other contraventions. The appellants admitted the short payment but attributed it to procedural lapses and negligence by their employees, not intentional evasion.

2. Applicability of Rule 8(3A) of the Central Excise Rules, 2002:
The appellants argued that Rule 8(3A) applies only in cases of total default in duty payment for an entire month, not short payments. They relied on the Tribunal's decision in Commissioner of Customs and Central Excise, Indore v. Deepak Silicate (P) Ltd., which suggested that short payment does not equate to default. However, the Tribunal clarified that Rule 8(3A) is mandatory and applies to any failure to comply with the duty payment obligation, whether partial or total. The Tribunal emphasized that the term "default" includes any omission or failure to perform a legal or contractual duty, thus encompassing short payments.

3. Justification for the Imposition of Penalties:
The Commissioner found that the appellants' system for calculating duty liability was incorrect, leading to short payments. The Tribunal agreed that the appellants failed to provide a cogent explanation for the discrepancies in their returns and invoices. The Tribunal upheld the penalties, noting that the provisions of Section 11AC of the Central Excise Act, 1944, ensure penalties are imposed considering the circumstances of the default, and only intentional evasion warrants a 100% duty liability.

4. Alleged Undue Haste by the Department in Enforcing Recovery:
The appellants contended that the department acted hastily in recovering dues despite the pending appeal and stay application. The departmental representative argued that the guidelines under the CBEC's Excise Manual mandate timely recovery proceedings. The Tribunal found no undue haste, noting that the department followed the prescribed guidelines and the appellants had a history of discrepancies in their duty payments.

5. Detention of Goods and Its Legality:
The Tribunal noted that while the department has guidelines for detaining goods, there was no evidence of consistent past defaults by the appellants. The Tribunal vacated the detention order, allowing the appellants some breathing time to clear the goods, but permitted the department to take appropriate steps after the appeal period expires.

Conclusion:
The Tribunal upheld the Commissioner's order regarding the short payment of duty and the imposition of penalties under Rule 8(3A) of the Central Excise Rules, 2002. The Tribunal found the appellants' arguments unconvincing and emphasized the mandatory nature of the duty payment rules. However, the Tribunal vacated the detention order, recognizing the appellants' need for some relief. The appeal was disposed of with these terms.

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