2016 (12) TMI 657 - AT - Central Excise

Default in timely payment of central excise duty for the month of May 2011 in terms of Rule 8(1) of Central Excise Rules 2002 - contravention of the provisions of Rule 8(3A) as they have not paid duty on excisable goods consignment wise and also using only cash - Held that - Admittedly the appellant did not discharge their duty liability for the month of May 2011 within time as stipulated in Rule 8(1). Accordingly the clearances made from June 2011 November 2011 utilizing cenvat credit were considered as non-duty paid clearance and the duty was confirmed with interest to be paid by cash. The appellants pleaded that the amount payable by them for the month of May 2011 was correctly worked out and reflected in ER-1 return. However on account of calculation mistake the amount of 23, 86, 456/- was debited in place of correct duty liability of 28, 66, 254/-. They had sufficient balance in the cenvat credit account to pay this differential duty and hence it was pleaded that it was a bona fide mistake and cannot be considered as default payment. We note that utilization of cenvat credit for discharging central excise duty during default period has been the subject matter of decisions by the Tribunal as well as various High Courts. We find that similar matters came up for decision before the Tribunal in various cases. In Steel Tubes of India Ltd. vs. C.C.E. Indore 2016 (2) TMI 684 - CESTAT NEW DELHI it was held that the duty liability when fully discharging payment of the amount again by cash only which resulted in to re-credit of already debited credit is not necessary. Appeal allowed - decided in favor of assessee.

Summary

Issues:
- Timely payment of central excise duty
- Utilization of cenvat credit for discharging duty liability
- Calculation mistake leading to differential duty payment
- Legality of utilizing cenvat credit during default period

Analysis:
1. The case involved the issue of timely payment of central excise duty by the appellants for the month of May 2011, as per Rule 8(1) of the Central Excise Rules, 2002. The proceedings were initiated against the appellants for contravention of Rule 8(3A) due to non-payment of duty on excisable goods consignment-wise and using only cash. The original authority held the appellants liable to pay a substantial amount for the period from 14.1.07 to 31.3.11 and imposed a penalty on them.

2. The appellants argued that they had a calculation mistake in determining the correct duty liability for May 2011, resulting in a differential amount debited. They contended that this was a bona fide mistake as they had enough balance in the cenvat credit account to pay the correct duty amount. The Tribunal considered similar cases and held that utilizing cenvat credit to discharge central excise duty during a default period is permissible, citing relevant judgments from various High Courts and the Supreme Court.

3. The Tribunal referred to judgments such as Steel Tubes of India Ltd. vs. C.C.E., Indore and Malladi Drugs & Pharmaceuticals Ltd. vs. UOI to support the appellants' right to use cenvat credit for duty payment during a default period, unless there is an illegality or irregularity involved. Additionally, the Tribunal noted that various High Courts had held Rule 8(3A) to be unconstitutional, further supporting the appellants' position. The decision of the Hon'ble Supreme Court in Jayswal Neco Ltd. affirmed the acceptability of duty payment through cenvat credit during a default period.

4. Considering the analysis of relevant cases and legal principles, the Tribunal found no merit in the impugned order and set it aside, allowing the appeal in favor of the appellants. The judgment was pronounced in open court on 08/11/2016 by the Tribunal members, Mr. (Dr.) Satish Chandra and Mr. B. Ravichandran.