2012 (2) TMI 420 - AT - Central Excise

CENVAT Credit - Remission of excise duty through PLA - Wrong availment of CENVAT Credit - Held that - prima facie Rule 8(3) or Rule 8(3A) of Central Excise Rules, 2002 do not have the effect of denying the eligibility for Cenvat credit because Rule 8(3A) prescribes that if there is a default, the consequence under the Central Excise Rules will follow and there is nothing mentioned about denying the benefit governed through Cenvat Credit Rules, 2004. In the normal circumstances, payment made through Cenvat credit account is a good discharge of duty liability. The exception carved out in Rule 8(3A) is that payment through Cenvat credit is not a good payment when assessee is a defaulter. This exception will last only till the default lasts. Once default is made good, the payment made through credit account becomes good payment even if paid before paying the defaulted amount - Conditional stay granted.

Summary

Issues:
Default in payment of excise duty as per Rule 8 of Central Excise Rules, 2002; Utilization of Cenvat credit for payment of excise duty during default; Demand notice for unpaid excise duty, interest, and penalty; Appropriation of amounts paid through Cenvat credit and PLA; Dispute over penalty amount imposed; Interpretation of Rule 8(3A) regarding Cenvat credit utilization during default; Justification for interest calculation; Applicability of penalty under Rule 27 of Central Excise Rules.

Analysis:
The appellants, manufacturers of excisable goods, failed to pay excise duty as required by Rule 8 of Central Excise Rules, 2002 for the period November 2007 to September 2008. They cleared goods but did not remit excise duty payable through PLA, leading to a total default amounting to Rs. 30,90,255. The Revenue demanded this amount along with interest and imposed a penalty of Rs. 20,000. The Commissioner (Appeals) confirmed the demand, directing the appellants to pay the amount through PLA and increasing the penalty to Rs. 9,84,355. The appellants contested, arguing that Rule 8(3A) does not bar Cenvat credit utilization and that once the default is rectified, Cenvat credit payment should suffice, seeking waiver of pre-deposit and a stay on collection pending appeal.

The Revenue contended that payment through Cenvat credit during default does not discharge excise duty properly. The Tribunal noted that Rule 8(3A) restricts Cenvat credit use during default but does not negate its eligibility. Payment through Cenvat credit is considered valid once the default is rectified, even if made before clearing the defaulted amount. Interest was deemed justifiable on delayed PLA payments and during the default period for Cenvat credit payments. Citing a precedent, the Tribunal held that penalty should be imposed under Rule 27 of Central Excise Rules, a lower amount, not Rule 25. The appellants were directed to pay the interest as per the Tribunal's explanation within six weeks, with a stay on collecting the remaining dues pending appeal after compliance.

This judgment clarifies the interpretation of Rule 8(3A) regarding Cenvat credit utilization during default, ensuring proper discharge of excise duty obligations. It also establishes the calculation of interest on delayed payments and during default periods for different payment modes. Moreover, the judgment highlights the appropriate penalty provision under Rule 27, emphasizing fair enforcement of penalties in excise duty cases.