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2013 (6) TMI 83 - HC - Central ExciseDefault in payment of duty - penalty - mandatory requirement to pay in Cash - restriction on utilization of credit - Rule 8(3) - held that - There is a clear contravention of sub-rule (4) of Rule (8) of the Rules. However in the facts of the present case resort could not have been made to Rule 25 of the Rules. The relevant rule would be Rule 27 of the Rules which makes provision for General penalty under which the maximum penalty is five thousand rupees. Having regard to the facts and circumstances of the case after this length of time considering the smallness of the amount involved even while answering the question in the affirmative that is in favour of the revenue and against the assessee this court does not deem it fit to disturb the order passed by the Tribunal. - Decided against the revenue.
Issues Involved:
1. Whether an assessee can make payment from the deemed credit account despite the specific rule to make the payment through the account current (PLA) when they default in fortnightly payments and forfeit the facility of payment of duty on a fortnightly basis. 2. Applicability of the judgment of the Bombay High Court in Lloyds Steel Industries Limited v. Union of India to the present case. 3. Justification of the penalty imposed under Rule 25 of the Central Excise Rules, 2002. Issue-wise Detailed Analysis: 1. Payment from Deemed Credit Account vs. Account Current (PLA): The central issue was whether the assessee could make payments from the deemed credit account despite specific rules mandating payment through the account current (PLA) when the facility of fortnightly payments was forfeited. The court observed that Rule 8 of the Central Excise Rules, 2002, provides a scheme for fortnightly payment of duty but also has provisions for the consequences of defaults. Specifically, sub-rule (4) mandates that upon default, the assessee must pay duty on a consignment basis by debit to the account current (PLA) and not through any other means, including the deemed credit account. The court held that the assessee's payment from the deemed credit account, instead of the PLA, was in clear contravention of Rule 8(4). 2. Applicability of Lloyds Steel Industries Limited v. Union of India: The Tribunal had set aside the order of the Commissioner (Appeals) by relying on the decision of the Bombay High Court in Lloyds Steel Industries Limited v. Union of India. However, the court noted that the Tribunal did not discuss how the facts of Lloyds Steel were applicable to the present case. The Bombay High Court decision was based on a concession that utilizing Cenvat credit is as good as making payment by debiting the account current, which was not the case here. The court clarified that under the existing rules, payment must be made through the account current (PLA) during the period of forfeiture, and the Tribunal erred in applying the Bombay High Court's decision. 3. Justification of Penalty under Rule 25: The adjudicating authority imposed a penalty equal to the amount of duty under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld this penalty, stating that there was no requirement of mala fide intention for imposing a penalty under Rule 25(1)(a). However, the court referred to its decision in Commissioner of Central Excise and Customs v. Saurashtra Cement Ltd., which held that for invoking Rule 25, the conditions of Section 11AC of the Central Excise Act must be met, including fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. Since there was no such finding in the present case, the court concluded that the penalty under Rule 25 was not justified. Instead, the appropriate rule for penalty would be Rule 27, which provides for a general penalty with a maximum of five thousand rupees. Conclusion: The court found a clear contravention of Rule 8(4) by the assessee but held that the penalty under Rule 25 was not warranted due to the absence of conditions specified in Section 11AC. The court deemed Rule 27 as the appropriate provision for penalty but chose not to disturb the Tribunal's order due to the small amount involved and the passage of time. The appeal was disposed of accordingly.
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