2016 (9) TMI 480 - AT - Central Excise

Quantification of demand - demand of ₹ 11,33,711/- is not part of the total demand of ₹ 50,98,279/- - Held that - it is found that the duty demand of ₹ 50,98,279/- pertains to the period 05.08.2006 to 31.07.2007, when the assessee cleared the goods in contravention of the provisions of Rule 8(3A) ibid, whereas, the duty demand of ₹ 11,33,711/- pertains to the period June, 2006 and July, 2006, which was not proposed for recovery in the Show Cause Notice. Thus, the adjudicating authority has not quantified the demand properly in the adjudication order. Whether the payment of defaulted amount through debit in the Cenvat account is in conformity with the provisions of Sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002 - default in making payment of duty beyond thirty days from due date - Held that - the provisions of sub-rule (3A) of Rule 8 ibid are applicable to the facts of the case, according to which the assessee was required to pay the excise duty for each consignment at the time of removal. The fact is not under dispute that out of the central Excise duty amount of ₹ 50,98,279/- payable under Rule 8(3A) ibid, the assessee had paid ₹ 7,16,712/- from PLA and the balance amount of ₹ 43,81,567/- from the Cenvat account with interest for delayed payment. So far as the restrictions contained in Rule 8(3A) ibid that Cenvat credit cannot be utilised for payment of duty on removal of goods consignment-wise, we find that the Hon ble Gujarat High Court, in the case of Indsur Global Ltd. Vs. Union of India 2014 (12) TMI 585 - GUJARAT HIGH COURT has declared the phrase without utilising the Cenvat credit contained in Rule 8(3A) as ultra vires. The effect of the said Rule after pronouncement of the above judgement is that the assessee can discharge its duty liability by making debit entry in the Cenvat account. In the present case, since the assessee has paid the entire duty through PLA and Cenvat account along with interest, in our considered view, such payment is in conformity with the provisions of Rule 8(3A) of the Rules. Imposition of penalty - non-payment of duty consignment-wise - Held that - there is contravention of Rule 8(3A) of the Rules, for which the penalty imposed under Rule 25 of the Rules is justified. However, considering overall facts and circumstances of the case, we are of the view that penalty imposed in the adjudication order is on the higher side, which is required to be reduced in the interest of justice. - Appeal disposed of

Summary

Issues:
1. Discrepancy in Cenvat demand amount between impugned order and Show Cause Notice.
2. Legality of confirming demand under Section 11A of Central Excise Act, 1944.
3. Applicability of Rule 8(3A) of Central Excise Rules, 2002 regarding duty payment.
4. Validity of penalty imposed under Rule 25 of the Rules.

Analysis:
1. The Revenue contested the Cenvat demand discrepancy, arguing that the amount dropped in the impugned order was not part of the total demand proposed in the Show Cause Notice. The Tribunal found that the duty demands for different periods were not properly quantified by the adjudicating authority, leading to a discrepancy in the amounts. Consequently, the appeal was allowed in favor of the Revenue, directing the assessee to pay the entire demand proposed in the Show Cause Notice.

2. The assessee challenged the confirmation of demand under Section 11A of the Central Excise Act, contending that the duty liability had been discharged through the Cenvat account or the current PLA account with interest, as per Rule 8(3A) of the Central Excise Rules. Citing a judgment from the Gujarat High Court, the appellant argued that payment through the Cenvat account was compliant with the law. The Tribunal agreed with the assessee, setting aside the confirmed demand of &8377; 39,64,568/- and allowing the appeal in their favor.

3. Regarding the application of Rule 8(3A) of the Central Excise Rules on duty payment, it was established that the assessee had paid a portion of the duty from the PLA and the remaining amount from the Cenvat account with interest. The Tribunal noted the Gujarat High Court's ruling declaring the restriction on Cenvat credit utilization as ultra vires, allowing duty discharge through the Cenvat account. As the assessee had paid the duty in compliance with Rule 8(3A), the Tribunal deemed the payment to be in accordance with the law.

4. The imposition of penalty under Rule 25 for non-payment of duty consignment-wise was found justified due to the contravention of Rule 8(3A). However, considering the overall circumstances, the Tribunal deemed the penalty amount to be excessive and reduced it to &8377; 5,000 in the interest of justice. Consequently, the appeals were disposed of with the aforementioned decisions.