2012 (3) TMI 365 - AT - Central Excise

Waiver of condition of pre-deposit - Denial of CENVAT Credit - Partial duty liability cleared by CENVAT Credit - Partial amount cleared by cheque - Dishonour of cheque not informed by department or bank to appellant - Held that - cheque for payment of balance excise duty for the month of July amounting to Rs. 3,93,607/- issued on 1-9-2009 was dishonoured. Therefore, prima facie, the aforesaid cheque, which was dishonoured for whatsoever reasons, cannot be taken as the payment of excise duty. Admittedly, the arrears of excise duty were paid on 2-2-2010 i.e. after a delay of 180 days from the date on excise duty became due and the interest thereon was deposited much later i.e. on 7-5-2010. Thus, there is a clear default in payment of excise duty for a period more than 30 days. As such, Rule 8(3A) of the Central Excise Rules, 2002 would come into play, which clearly provides that if the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in Rule 8(3A), the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the Cenvat credit. Appellant has availed of Cenvat credit in violation of Rule 8(3A) of Central Excise Rules, therefore, prima facie, the Adjudicating Authority has rightly disallowed the Cenvat credit adjustment against the excise duty payable and raised the demand for the excise duty on subsequent consignments removed without making good the shortfall in excise duty for the month of July, 2009 with interest - No prima facie case for waiver of the condition of pre-deposit of demand - Conditional stay granted.

Summary

Issues:
- Waiver of pre-deposit condition of adjudged excise duty demand for hearing of appeal.

Analysis:
The appellant, a registered manufacturer of excisable goods, faced a shortfall of excise duty for goods cleared in July 2009, amounting to Rs. 3,93,607/-. A cheque issued for this amount was dishonored, leading to a delay in payment. The Commissioner alleged a violation of Rule 8(3A) of the Central Excise Rules, stating that the appellant should have paid the duty in cash after the default, instead of adjusting it against Cenvat credit. A show cause notice was issued, and the Adjudicating Authority disallowed Cenvat credit of Rs. 1,10,61,274/-, demanding it in cash with interest and imposing a penalty of Rs. 1 lakh.

The appellant contended that the delay was unintentional due to not being informed of the cheque dishonor, and paying the balance duty with interest later. The appellant argued against double taxation, as Cenvat credit was already utilized for subsequent clearances. The Departmental Representative emphasized Rule 8(3A), stating that the appellant's actions constituted a violation, leading to no grounds for waiving the pre-deposit condition.

Upon review, the Tribunal found that the dishonored cheque did not constitute payment, and there was a clear default in duty payment beyond 30 days. Rule 8(3A) mandated cash payment for subsequent clearances after default, which the appellant failed to comply with by using Cenvat credit. Consequently, the Tribunal upheld the demand for excise duty with interest, denying the waiver of pre-deposit condition but dispensing with the penalty.

Therefore, the appellant was directed to deposit the duty demand of Rs. 1,10,61,274/- with interest within 8 weeks, with the penalty being waived upon compliance. The Tribunal clarified that Cenvat credit entries contravening Rule 8(3A) would be reversed upon deposit, and recovery would be stayed accordingly. Compliance was to be reported by a specified date.