2017 (11) TMI 1797 - AT - Central Excise

Default in payment of duty - requirement of payment from PLA for the subsequent months - Rule 8(3A) of CER - Held that - The appellant had subsequently discharged the duty burden from their PLA account and as such there is no dispute about the same. With such payment of duty out of PLA they have reversed the debit entry made by them in their credit account which was used for payment of duty earlier - Though there was no proposal in show cause notice to deny such recredit the original adjudicating authority went ahead and even after accepting that the duty was paid subsequently in cash disallowed the recredit and confirmed the duty to that extent. Once a duty stands paid in cash earlier payments made through Cenvat account are liable to be recredited in the said account and no objection that such recredit was not on the basis of any eligible document can be adopted by the Revenue. Admittedly it is not a case of availment of credit in the ordinary course but such recredit was to neutralize the subsequent payment of duty in cash. Appeal dismissed - decided against Revenue.

Summary

Issues:
Revenue's appeal against duty payment and penalty imposition based on utilization of credit for duty payment during default period.

Analysis:
The appeal before the Appellate Tribunal CESTAT Kolkata involved a dispute regarding duty payment by a manufacturer of Lead Nitrate who defaulted in May 2007, leading to subsequent duty payment from PLA. The respondent cleared their final product in July 2007 partly by cash and partly by utilizing credit, which was objected to by the Revenue. The appellant later paid the duty in cash equal to the credit utilized, taking re-credit in their Cenvat Account. The show cause notice proposed a demand of duty and penalty, but the original adjudicating authority acknowledged the cash payment but disallowed recredit in the Cenvat account, imposing a penalty. On appeal, the Commissioner (Appeals) referred to the Tribunal's decision in SCT Ltd. case, stating no obligation existed for the assessee not to use Cenvat credit for duty payment during a default period, setting aside the penalty. The Revenue appealed, arguing against the reliance on the SCT Ltd. case due to a pending Supreme Court case on Rule 8(3A) mandating cash duty payment during defaults. However, the Tribunal found the appellant had discharged the duty from their PLA account, reversing the credit used earlier, and upheld the Commissioner's decision. The Tribunal emphasized that once duty is paid in cash, recredit in the Cenvat account is permissible, rejecting the Revenue's appeal.