2009 (2) TMI 147 - AT - Central Excise

Irregular payment of duty interest and penalty sick unit - held that the appellant is not liable to pay any interest or penalty and since the appellant has already been declared as a sick industrial company, the amount debited by them in the Cenvat credit towards the duty liability should be considered as discharge of all duty liability by the appellant, and that portion of the impugned orders directing the appellant to pay the duty confirmed in PLA and subsequently take credit in Cenvat register is liable to be set aside

Issues Involved:

1. Default in discharging duty payment under Rule 8 of the Central Excise Rules, 2002.
2. Utilization of Cenvat Credit for duty payment.
3. Imposition of interest and penalty.
4. Appellant declared as a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985.
5. Implementation of the scheme by the Board for Industrial and Financial Reconstruction (BIFR).

Issue-wise Detailed Analysis:

1. Default in Discharging Duty Payment:
The appellant defaulted in discharging the duty payment to the revenue under Rule 8 of the Central Excise Rules, 2002, read with Rule 3 of the Cenvat Credit Rules, 2002/2004. The Adjudicating Authority confirmed the demand for duty and imposed penalties for the defaults.

2. Utilization of Cenvat Credit for Duty Payment:
The appellants were directed to make duty payments through PLA (Personal Ledger Account), but they made payments through Cenvat Credit. The Adjudicating Authority rejected the utilization of Cenvat Credit and demanded the duty to be paid through PLA, with the consequential relief of taking back the credit already utilized.

3. Imposition of Interest and Penalty:
The Adjudicating Authority imposed penalties under Rule 25 read with sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002/2004, and Rule 15 of the Cenvat Credit Rules, 2004. Additionally, interest was demanded under Section 11AB of the Central Excise Act, 1944.

4. Appellant Declared as a Sick Industrial Company:
The appellant was declared a sick industrial company, and the Board for Industrial and Financial Reconstruction (BIFR) approved a revival scheme. Under this scheme, statutory liabilities were to be discharged within seven years, and all penal interest, interest, damages, and penalties were to be waived.

5. Implementation of the Scheme by BIFR:
Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, provides that once a scheme is sanctioned by the BIFR, it has an overriding effect over other laws. The scheme included provisions for waiving penalties and interest on statutory dues and allowed the appellant to discharge liabilities over a period of seven years without interest or penalties.

Judgment:

The Tribunal considered the submissions and perused the records. It was undisputed that the appellant had been declared a sick industrial company, and the BIFR had sanctioned a revival scheme. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, was cited, highlighting that the scheme would have an overriding effect over other laws.

The Tribunal noted that the BIFR's order included a waiver of penal interest and penalties. Consequently, the Tribunal held that the appellant was not liable to pay any interest or penalties. The duty liability discharged through Cenvat Credit was deemed sufficient, and the direction to pay the duty through PLA was set aside.

Conclusion:

The appeals filed by the appellant were allowed, setting aside the interest and penalty portions of the Orders-in-Original. The Tribunal recognized the overriding provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and upheld the BIFR's scheme, providing relief to the appellant.

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