2011 (6) TMI 640 - AT - Central Excise

Defaults in payment of duty beyond thirty days - case made out by revenue is that during the defaulting period the Appellants were required to pay duty on each consignment without availing Cenvat credit as required under sub-rule (3A) of Rule 8 - Held that - interest will be payable from the date of each clearance to the date on which the default is made good that is 20-4-2007. - This is so because once the defaulted amount is paid, thereafter the payment made through Cenvat become proper even if it is paid before the date on which defaulted amount is paid, there is no case for demanding the duty paid through Cenvat credit to be paid again through cash/PLA. - Penalty under Rule 27 imposed amounting to Rs. 5000/-

Summary

Issues:
Default in payment of duty under Rule 8(3A) of the Central Excise Rules, 2002 leading to penal consequences, demand of duty, interest, and penalty under Section 11A of the Act, imposition of penalty under Rule 25 of Central Excise Rules, 2002, interpretation of Rule 8(3A) regarding Cenvat credit utilization and duty payment, applicability of penalties under Rule 27, harmonious interpretation of Act and Rules regarding duty payment and consequences.

Analysis:

1. Default in Duty Payment and Penal Consequences:
The Appellant failed to pay duty of Rs. 16,12,837/- by the due date, leading to penal consequences under Rule 8(3A) of the Central Excise Rules, 2002. The Appellant paid the duty in instalments but was considered a defaulter from 6-2-2007 to 20-4-2007. The revenue alleged that duty on consignments during the defaulting period was not paid as required, amounting to Rs. 21,17,829/-, the Cenvat credit utilized during that time.

2. Demand of Duty, Interest, and Penalty:
A Show Cause Notice resulted in the confirmation of duty demanded along with interest under Section 11AB and a penalty of Rs. 5,00,000/- under Rule 25 of Central Excise Rules, 2002. The Appellant challenged this order before the Tribunal, arguing for the re-credit of Cenvat account for duty paid during the defaulting period and payment of interest till the defaulted amount was cleared.

3. Interpretation of Rule 8(3A) and Consequences:
Rule 8(3A) mandates duty payment on each consignment without utilizing Cenvat credit during defaulting period. The Appellant did not comply with this rule. The consequences of clearances without duty payment are outlined under the Act and Rules, including recovery of duty, interest, penalty, and confiscation of goods.

4. Harmonious Interpretation of Act and Rules:
A harmonious interpretation of the Act and Rule 8(3A) implies that during default, duty payment through Cenvat credit is not a proper discharge of duty. Once the defaulted amount is paid, interest becomes payable until the default is rectified. The only consequence in this case should be payment of interest and penalty, not demanding duty payment in cash again.

5. Applicability of Penalties under Rule 27:
The Tribunal held that there is no need to demand duty paid through Cenvat credit to be paid again in cash. Instead, a penalty of Rs. 5000/- under Rule 27 of the Rules was imposed. The Appeal was disposed of accordingly.

By analyzing the issues of default in duty payment, demand of duty, interest, and penalty, interpretation of Rule 8(3A), and applicability of penalties under Rule 27, the Tribunal clarified the consequences of non-compliance and provided a reasoned decision based on a harmonious interpretation of the Act and Rules.