2007 (8) TMI 290 - AT - Central Excise

Respondents had paid duty on fortnightly basis when that facility was denied to them as per the statutory provisions - They also discharged part of the duty (25%) from deemed credit - respondents had contravened the provisions of Rule 8(4) of the Central Excise (No.2) Rules, 2001 by not discharging the duty on consignment basis - As the respondents had met the duty liability from deemed credit & from PLA, penalty is justified for impugned procedural non-compliance

Summary

Issues:
1. Appeal against Orders-in-Appeal modifying penalty and duty demand.
2. Eligibility for deemed credit during suspension of fortnightly duty payment facility.
3. Interpretation of Rule 8(4) of the Central Excise Rules, 2001.
4. Application of Cenvat credit during the period of facility forfeiture.
5. Compliance with duty payment provisions on consignment basis.
6. Validity of penalty imposition by the original authority.

Issue 1 - Appeal against Orders-in-Appeal:
The appeals filed by the Revenue sought to vacate Orders-in-Appeal modifying penalty and duty demand. The Commissioner (Appeals) had allowed the appeals of the respondents, leading to the Revenue's challenge before the Appellate Tribunal.

Issue 2 - Eligibility for Deemed Credit:
The main contention revolved around the respondents' eligibility for deemed credit during the suspension of the fortnightly duty payment facility. The Commissioner (Appeals) found the respondents eligible for deemed credit during this period, leading to a restriction on the demand amount.

Issue 3 - Interpretation of Rule 8(4):
The Revenue argued that clearances made without entirely discharging duty liability should be treated as clearances without payment of duty under Rule 8(4) of the Central Excise Rules, 2001. This interpretation was crucial in determining the respondents' liability.

Issue 4 - Cenvat Credit Application:
The respondents cited a Tribunal decision and a High Court judgment to support their position that they were allowed to discharge duty liability using Cenvat credit during the period of facility forfeiture. This argument was pivotal in justifying their actions.

Issue 5 - Duty Payment Compliance:
The case highlighted the importance of complying with duty payment provisions on a consignment basis, especially when the fortnightly payment facility was suspended. The failure to pay duty consignment-wise was a key factor in determining the liability of the respondents.

Issue 6 - Penalty Imposition Validity:
The original authority had imposed penalties on the respondents under Rule 25 of the Central Excise Rules, 2001. The Appellate Tribunal reviewed the penalty imposition, considering the respondents' actions and the provisions of the law.

In a detailed analysis, the Appellate Tribunal found that while the respondents had used deemed credit to pay part of the duty, they had failed to discharge duty on a consignment basis as required by Rule 8(4) of the Central Excise Rules, 2001. The Tribunal held that the respondents did not have a subsisting duty liability for the clearances in question. Consequently, the appeal filed by the Revenue was allowed to the extent of restoring the penalty imposed by the original authority. The Tribunal upheld the penalty imposition in both appeals, emphasizing the importance of complying with duty payment provisions and the specific requirements of the law.