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2016 (9) TMI 370 - HC - Central ExciseRecovery of duty - annual capacity of production - consequential monthly duty liability fixed by the Jurisdictional Commissioner - manufacture of non-alloy steel ingots and billets - Chapter Sub-Heading No.7206.90 of the Schedule to the Central Excise Tariff Act 1985 - Section 3A of the Central Excise Act 1944 - CENVAT credit - Rule 57AB of the Central Excise Rules 1944 - Held that - the decision in the case Kalai Magal Alloys Steel Pvt. Ltd. v. CESTAT Chennai 2014 (1) TMI 1335 - MADRAS HIGH COURT has been relied upon where it was held that the scheme is comprehensive as regards payment of duty time and manner of payment. The said judgment is also applicable on the grounds of exclusion of the general provisions of the Act and the Rules during the period of the compounded levy scheme. When the general provisions of availing cenvat credit are excluded consequences thereof is to make payment through PLA which means remittance in cash - demand of duty justified. Imposition of penalty - Rule 96ZO(3) of the Central Excise Rules 1944 - Held that - imposition of penalty set aside. appeal disposed off - decided partly in favor of appellant.
Issues Involved:
1. Utilization of CENVAT Credit for payment of duty under the compounding levy scheme. 2. Interpretation of Rule 2(7) and Rule 57AB(1B) of the Central Excise Rules regarding the prohibition of utilizing CENVAT credit. 3. Legality of the penalty imposed under Rule 96ZO(3) of the Central Excise Rules. Analysis of Judgment: 1. Utilization of CENVAT Credit for Payment of Duty under the Compounding Levy Scheme: The appellant argued that during the period from October 1998 to February 1999, the duty of Rs. 16,06,507/- could be paid through the CENVAT account. The Commissioner of Central Excise disapproved this payment method, insisting that the duty should be paid through the Personal Ledger Account (PLA). The Tribunal upheld the Commissioner's view, stating that the compounded levy scheme required payment through PLA, and any unutilized balance of input credit and capital goods lying with manufacturers working under Section 3A would lapse forthwith. The Tribunal held that the duty demanded under the compounded levy scheme could not be paid through the CENVAT credit account. 2. Interpretation of Rule 2(7) and Rule 57AB(1B) of the Central Excise Rules: The appellant contended that as per Rule 2(7) of the Central Excise Rules, 'duty' means duty payable under Sections 3 and 3A of the Act, and there was no prohibition under Rule 57AB(1B) against utilizing available CENVAT credit for payment of duty. However, the Tribunal and the Commissioner held that during the period of the compounded levy scheme, the duty assessed under Section 3A was based on the annual capacity of production (ACP) and had to be paid in the manner specified under the scheme, which excluded the utilization of CENVAT credit. 3. Legality of the Penalty Imposed under Rule 96ZO(3) of the Central Excise Rules: The appellant challenged the imposition of a penalty of Rs. 16,06,507/-, which was later reduced to Rs. 2,00,000/- by the Tribunal. The Supreme Court in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise struck down the penalty provisions under Rules 96ZO, 96ZP, and 96ZQ as ultra vires. The High Court, following this precedent, held that the penalty imposed was not sustainable. Consequently, the appeal concerning the penalty was allowed in favor of the appellant. Judgment Summary: The High Court dismissed the appeal concerning the payment of duty, upholding the Tribunal's decision that the duty under the compounded levy scheme could not be paid through the CENVAT credit account and had to be paid through PLA. However, the appeal concerning the penalty was allowed, as the Supreme Court had declared the penalty provisions under the relevant rules ultra vires. The High Court emphasized that the compounded levy scheme was a comprehensive scheme, and the general provisions of the Central Excise Act and Rules were excluded during its operation. The appellant was bound by the terms of the scheme, which mandated payment through PLA and excluded the utilization of CENVAT credit during the relevant period.
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