2014 (10) TMI 479 - HC - Central Excise

CENVAT Credit - Not payment of duty and cess with stipulated time of 30days - Held that - The petitioner admittedly does not dispute the fact that they have defaulted in payment beyond 30 days. In such circumstances, action initiated by the respondent cannot be faulted with. However, it is stated that the assessee has given the statement to the investigating officer on 07.03.2014, which is contrary to the contention now raised before this Court in this writ petition. Therefore, the respondent would justify the action that based on the assessee s demand alone, they have initiated action. As pointed out earlier, there is no discretion vested with the authority to allow the petitioner to avail Cenvat credit till they clear dues. Once they clear dues, admittedly, the benefit is accrued to the petitioner, if there is no other legal impediment for doing so - Decided against assessee. At this juncture, learned Senior Counsel for the petitioner submitted that already ₹ 77 lakhs has been recovered from the petitioner and therefore, the petitioner may be given an opportunity to approach the respondent with the request to pay the remaining amount in installments or by granting reasonable time and in the meantime, no coercive steps should be initiated against the petitioner. - while dismissing the appeal, liberty granted to the petitioner to submit its representation to the 2nd respondent within a period of 10 days from the date of receipt of a copy of this order, requesting for time by duly indicating as to what date the balance amount will be paid.

Summary

Issues:
Challenge to order under Central Excise Rules, 2002 for non-payment of duty and applicable cess within due date; Utilization of Cenvat Credit for payment of excise duty; Dispute on interpretation of Rule 8(3A) of Central Excise Rules, 2002; Recovery action under Section 11 of the Central Excise Act, 1944.

Analysis:
The petitioner challenged an order passed by the 2nd respondent for not paying duty and applicable Education Cess and Secondary Higher Education Cess within the stipulated due date as per Rule 8(1) of Central Excise Rules, 2002. The 2nd respondent pointed out that the petitioner utilized Cenvat Credit for payment of Excise duty, contravening Rule 8(3A). The petitioner argued that they had sufficient balance in the Cenvat account and cited decisions of CESTAT allowing credit utilization for Education Cess. The respondent, however, cited a previous judgment holding that Cenvat credit cannot be used if duty is not paid on time under Rule 8(3A) - rejecting the petitioner's plea.

The petitioner failed to make the payment, leading to recovery action from their suppliers. The respondent emphasized that availability of credit does not justify availing Cenvat credit. The Rules mandate duty payment by the 6th or 5th of the succeeding month and forfeiture of Cenvat credit if duty remains unpaid for over 30 days. The Court noted the petitioner's default beyond 30 days and upheld the respondent's actions, stating that the Rules require recovery of arrears under relevant Acts.

The respondent justified their actions based on the petitioner's default and lack of discretion to allow credit utilization until dues are cleared. The Court acknowledged the recovery already made from the petitioner but dismissed the writ petition. However, the petitioner was granted liberty to approach the 2nd respondent within 10 days to request payment in installments or seek reasonable time for settling the remaining amount. No coercive steps were to be taken during this period, allowing for a resolution without additional costs.