2012 (11) TMI 301 - AT - Central Excise

Forfeiture of monthly payment facility - Cenvat Credit account partly for payment of duties- Held that - In the order dated 15/10/2009 passed by this Tribunal there is no reference to forfeiture of the facility under Rule 8 (3A) ordered by the Assistant Commissioner, which implies that this issue was not challenged before the Tribunal and therefore, the forfeiture of monthly payment facility and cenvat credit availment attained finality. What was decided by this Tribunal was only the rate of interest liable to be paid and the amount of penalty imposed. Therefore, the appellant cannot agitate now the forfeiture of facility of paying duty using Cenvat Account under Rule 8 (3A). As during the subsequent period, when the provisions relating forfeiture was operational, the appellant could not have utilized the Cenvat Credit account for payment of duty at all. In that view, the appellant was wrong in utilizing the Cenvat credit amount for payment of duty and this amount has to be made good by the appellant by payment in cash/PLA. In as much as the appellant has not paid this amount and there is a delay in payment, the appellant is also liable to pay interest thereon under Section 11AB and the appellant has to pay interest on the defaulted amount in PLA account. As regards the penalty of Rs.2 lakhs imposed u/r 25 can be imposed when the goods are held liable to confiscation. As neither in the show-cause notice nor in the orders passed by the lower authority any finding that the goods are liable to confiscation and consequently without giving a positive finding in this regard, penalty could not have been imposed. Further maximum penalty imposable under the said rule is equal to the duty involved or Rs.2000/- whichever is higher. Therefore, imposition of penalty of Rs.2 lakhs which is far in excess of the duty involved is bad in law and cannot be sustained. Accordingly the same is set aside.

Summary

Issues:
- Appeal against order-in-appeal dated 20/09/2010 passed by the Commissioner of Central Excise (Appeals), Navi Mumbai
- Forfeiture of monthly duty payment facility and cenvat credit utilization
- Imposition of penalty exceeding duty liability

Analysis:
1. The appellant, M/s. Wasp Pumps Pvt. Ltd., had cleared excisable goods without timely duty payment during January to December 2005, leading to a subsequent duty payment with unpaid interest. The Assistant Commissioner confirmed duty demand, interest, and penalty, along with the forfeiture of monthly duty payment facility and cenvat credit availment for two months. The Tribunal's 2009 order held the appellant liable for interest at 13% and reduced the penalty, but did not address the forfeiture issue.

2. Subsequently, the appellant utilized Cenvat Credit account for duty payment during the forfeiture period, resulting in a demand for Rs.62,157 paid erroneously through Cenvat Credit. The adjudicating authority confirmed the demand, directed cash payment with interest, and imposed a penalty of Rs.2 lakhs under Rule 25 (1) of the Central Excise Rules, 2002. The lower appellate authority upheld this decision, leading to the current appeal.

3. The appellant argued that the Tribunal's 2009 order precludes the forfeiture of monthly duty payment and cenvat credit facility post-2009. They contended that Rule 8 (3A) of the Central Excise Rules, 2002, only allows the forfeiture of the monthly payment facility, making the demand for interest incorrect. Regarding the penalty, it was argued that the penalty amount exceeds the duty liability, rendering it unlawful.

4. The Tribunal noted that the 2009 order did not address the forfeiture issue, implying its finality. The appellant's use of Cenvat Credit during the forfeiture period was deemed incorrect, necessitating repayment in cash/PLA. Failure to pay this amount incurs interest under Section 11AB. The penalty of Rs.2 lakhs under Rule 25 was deemed excessive, as it lacked findings on goods' confiscation and exceeded the permissible penalty amount, resulting in its annulment.

5. Consequently, the Tribunal upheld the demand for repayment of Rs.62,157 in cash/PLA with interest, while setting aside the penalty of Rs.2 lakhs. The appeal and stay application were disposed of accordingly.