2016 (11) TMI 697 - AT - Central Excise

Demand - utilization of CENVAT credit for payment of excise duty - non-discharge of duty within time period prescribed as per Rule 8 (1) of Central Excise Rules, 2002 - invocation of Rule 8(3A) - appropriation of duty already paid through through Personal Ledger Account (PLA) - Held that - the appellants have not discharged the duty liability on monthly basis within stipulated time in terms of Rule 8(1). Hence Rule 8(3A) conditions apply for subsequent clearances. They were supposed to pay duty on each consignment and also without utilizing the cenvat credit - reliance placed on the decision of the case of Steel Tubes of India Ltd. vs. C.C.E., Indore 2016 (2) TMI 684 - CESTAT NEW DELHI where it was held that the duty liability when fully discharged, payment of the amount again by cash only which will result in to re-credit of already debited credit is not necessary - reliance also placed on the decision of the case of Jayaswal Neco Ltd. 2015 (8) TMI 404 - SUPREME COURT where it was held that the duty payment through cenvat credit during default period is acceptable mode of discharging duty - demand not justified - appeal allowed.

Summary

Issues:
1. Liability to pay duty only through cash due to default in payment of duty.
2. Applicability of Rule 8(3A) regarding duty payment using cenvat credit.
3. Interpretation of previous judgments and High Court decisions on cenvat credit for duty payment during default period.
4. Constitutionality of Rule 8(3A) as per various High Court decisions.
5. Acceptability of duty payment through cenvat credit during default period as per Supreme Court ruling.

Analysis:
1. The appellants, engaged in manufacturing excisable goods, failed to discharge duty on time from January 2010 to November 2010, leading to a demand for payment of ?1,49,17,065/- along with interest. The original authority determined the cash liability at ?16,69,419/-, of which ?11,23,262/- was already paid in cash. An additional penalty equal to the duty demand was imposed on the appellant under Rule 15 of the Cenvat Credit Rules, 2004.

2. The appeal contested the necessity of further duty payment, arguing that the duty liability with interest had been fulfilled, and cenvat credit usage should not be considered as non-payment of duty, citing relevant case laws.

3. The Tribunal analyzed the case and previous decisions, emphasizing that the appellants' failure to pay duty monthly within the prescribed time invoked Rule 8(3A), requiring duty payment for subsequent clearances in cash without utilizing cenvat credit. Referring to judgments like Steel Tubes of India Ltd. vs. C.C.E., Indore and Malladi Drugs & pharmaceuticals Ltd. vs. UOI, the Tribunal affirmed the right to use cenvat credit for duty payment even during default periods, unless irregular or illegal credit was involved. Various High Courts, including Gujarat and Punjab & Haryana, declared Rule 8(3A) unconstitutional. The Supreme Court in Jayaswal Neco Ltd. upheld duty payment through cenvat credit during default periods.

4. Considering the legal analysis and precedents, the Tribunal found no merit in the original order, setting it aside and allowing the appeal.

This detailed analysis of the judgment highlights the issues, arguments presented, legal interpretations, and the final decision rendered by the Tribunal, providing a comprehensive overview of the case.