2014 (11) TMI 422 - HC - Central Excise

Waiver of pre deposit - Delay in payment of duty - Violation of provisions of Rule 8(3A) of Central Excise Rules, 2002 - Penalty u/s 11AC Availment of CENVAT Credit - Held that - out of the total duty demand of ₹ 88.80 lacs, an amount of ₹ 16.70 lacs was deposited from the cenvat credit, which was not permissible in view of the provisions of Rule 8(3A) of the Rules. Moreover, it is also necessary to note that this is not a case where there was a default simpliciter. The assessee furnished details of 32 cheques, out of which, it is an admitted position that only one cheque of ₹ 92,700/- was honoured; 18 cheques for the payment of duty in the amount of ₹ 34.37 lacs were not honoured due to insufficiency of funds. But, what reflects on the willful misstatement of the assessee is that, in the case of the balance 13 cheques, the assessee produced counterfoils of the Bank with stamps and it was, on enquiry, found that the cheques were never presented with the Bank at all for the payment of duty. Provisions of Rule 25 of the Rules were attracted since there was an intent to evade the payment of duty. For these reasons, prima facie, we are of the view that no substantial question of law would arise in the appeal. However, in order to facilitate compliance with the order of the Tribunal, we extend time for making deposit by further period of two months from date of this order - Decided against the assessee.

Summary

Issues:
Appeal arising from Customs, Excise & Service Tax Appellate Tribunal order on waiver of pre-deposit due to default in excise duty payment; Difference of opinion between Tribunal members; Appellant directed to deposit Rs. 25 lacs as pre-deposit against full penalty amount of Rs. 88.80 lacs.

Analysis:
The judgment pertains to an appeal arising from an order of the Customs, Excise & Service Tax Appellate Tribunal regarding a waiver of pre-deposit due to a default in excise duty payment. The Tribunal faced a difference of opinion between its Member (Judicial) and Member (Technical), leading to a reference to a third member, who aligned with the Member (Technical). The dispute revolved around the appellant being directed to deposit Rs. 25 lacs as a pre-deposit, a reduced amount compared to the full penalty of Rs. 88.80 lacs imposed by the Commissioner, Central Excise. The appellant's financial difficulties were cited as the reason for the duty default, with reliance placed on legal precedents to argue for a lower penalty under Rule 27 of the Central Excise Rules.

The judgment delves into the specifics of the case, highlighting instances where the appellant failed to pay excise duty, leading to a duty demand of Rs. 88.80 lacs along with interest and penalties. The appellant's argument centered on financial constraints due to a reference before the Board for Industrial and Financial Reconstruction. However, the Tribunal found discrepancies in the payment details, including bounced cheques and non-presented cheques, indicating a willful intent to evade duty payment. The Tribunal justified the application of Rule 25 of the Rules due to this intent, dismissing the appellant's claim for a lower penalty under Rule 27.

In the legal analysis, the judgment references Rule 8 of the Central Excise Rules, outlining the obligations and consequences related to duty payment defaults. It notes that the appellant used cenvat credit impermissibly and failed to pay the outstanding duty amount on time, leading to penalties and interest. The Tribunal's decision to uphold the penalty under Rule 25 was based on the willful misstatements and actions of the appellant, indicating an intent to evade duty payment. The judgment concludes by dismissing the appeal and extending the deposit deadline by two months to facilitate compliance with the Tribunal's order, emphasizing that the observations are limited to the pre-deposit issue and will not impact the appeal's merits when heard by the Tribunal again.