2014 (6) TMI 414 - AT - Central Excise

Default in payment of duty - violation of Rule 8(3A) - Utilization of cenvat credit during period of default - Clandestine removal of goods - Held that - Clearances made by the applicant were not clandestine removals because the clearances were reported in the returns filed by applicant. The applicant was liable to pay duty in cash, when they were in default. Any payment made through Cenvat credit can be taken as proper discharge only when no bar as per Rule 8(3A) of Central Excise Rules, 2002 was operating. If payment was made through credit after they came out of defaulting period it would be acceptable as proper discharge. The payment prior to coming out of default cannot be refused for the reason that it was paid earlier but for the fact that interest has to be paid. Therefore, we order the applicant to calculate interest on clearances during the default period till Mar.09 to be calculated for each clearance from date of clearance to the end of defaulting period for payments made through Cenvat and deposit such amount as pre-deposit for admission of the appeal - Stay granted partly.

Summary

Issues:
Default in payment of Central Excise dues, utilization of Cenvat credit for payment, legality of duty payment through Cenvat credit, interest liability, appeal against order, stay petition.

Analysis:
The judgment pertains to a Central Excise assessee who defaulted in payment of Central Excise dues for the month of July, 2008. The defaulted amount was paid in September 2008, with interest paid in March 2009. The Revenue issued a Show Cause Notice for recovering the duty not paid in cash but paid through Cenvat credit, arguing that such payment could not be considered a legal discharge of duty payable. The Tribunal found that the assessee was in default from August 2008 to March 2009 as per Rule 8(3A) of the Central Excise Rules, prohibiting the utilization of Cenvat credit for duty payment during the default period. An amount of Rs. 14,18,184/- was confirmed against the applicant along with interest and penalty.

The applicant argued that the delayed payments were made due to the company being loss-making, and once out of default, the payments were proper. The applicant relied on specific decisions to support their argument. The Revenue contended that duty must be paid in cash when an assessee is in default as per Rule 8(3A), and payment through Cenvat credit cannot be considered as duty payment. The Tribunal noted that the clearances were not clandestine as reported in the returns but held that duty had to be paid in cash during default. Payment through Cenvat credit could be considered proper only after coming out of default. The Tribunal ordered the applicant to calculate interest on clearances during the default period and deposit the amount as pre-deposit for appeal admission within six weeks.

The Tribunal granted a stay on the collection of balance dues from the impugned order during the appeal's pendency subject to the deposit being made. The judgment emphasizes the importance of complying with Rule 8(3A) regarding duty payment during default periods and clarifies the conditions under which payment through Cenvat credit can be considered a legal discharge of duty payable.