2017 (12) TMI 326 - AT - Central Excise

Default in monthly payment of dues - rule 8(3A) of Central Excise Rules 2002 - contention of the appellant that the show cause notice was issued on 27th August 2008 when the restriction imposed in rule 8(3) of Central Excise Rules, 2002 was no longer application to them - scope and intent of rule 8 of the Central Excise Rules, 2002 - penalty u/r 15(2) of CCR - Held that - It is clear from the records that appellant had defaulted in the payment of dues during the months of May, August and September, 2007 and that the privilege of consolidated monthly discharge of duty liability was no longer available to them till November 2007 when the outstanding were erased. These facts are not disputed by appellant. Cognizance was taken of those derelictions about nine months later when the show cause notice for recovery was issued. Though the appellant had debited CENVAT account for discharging a portion of the duty liability that transaction had been received subsequently. The proposal in the show cause notice show cause notice for recovery of the amount paid through debit in CENVAT credit has been rendered infructuous as also the appropriateness of the said amount in the order of the original authority. Therefore, all that remains insofar this appeal is concerned are the penalties imposed under rule 15(2) and rule 25 of the CENVAT Credit Rules, 2004 to which reference may be made here. In view of the fact payment had been made in full along with interest before the issue of show cause notice the penalties imposed by the original authority and affirmed in the impugned order are set aside Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against recovery of CENVAT credit, imposition of penalties under CENVAT Credit Rules, contravention of Central Excise Rules, interpretation of rule 8, applicability of penalties, compliance with payment deadlines, intention to evade payment of duty.

Analysis:
1. The appellant, a manufacturer of specific goods, failed to comply with payment deadlines as per rule 8 of Central Excise Rules, 2002, resulting in recovery of CENVAT credit and imposition of penalties. The appellant argued that the show cause notice issued after they had cleared outstanding dues was not tenable, citing relevant legal precedents.

2. The appellant contended that the restriction in rule 8(3) was not applicable when the show cause notice was issued, and they voluntarily discharged the outstanding duty liability. Legal references were made to support the appellant's position, including judgments declaring rule 8(3A) ultra vires. The tax authority relied on previous tribunal decisions to emphasize strict liability requirements for contraventions under rule 25.

3. The records indicated the appellant's default in payment during specific months, leading to the loss of the privilege of consolidated monthly duty payment until outstanding dues were cleared. The tax authorities issued a show cause notice nine months later. The appellant acknowledged the delayed payments but disputed the excisability of goods upon manufacture, arguing for a more lenient approach.

4. The primary issue revolved around the interpretation and intent of rule 8 of Central Excise Rules, 2002, emphasizing self-regulation by the assessee. The appellant's failure to comply with this rule was noted, along with the tax authorities' delayed action in recovering outstanding dues.

5. The appellant's main contention, relying on legal provisions, was that penalties imposed under rule 15(2) and rule 25 of CENVAT Credit Rules, 2004 were unwarranted due to the full payment made before the show cause notice. The High Court's decision in a similar case supported this argument, leading to the setting aside of the penalties imposed.

6. The judgment highlighted the importance of intent to evade payment of duty for penalty imposition under rule 25, emphasizing that mere contravention was not sufficient. Given the circumstances beyond the appellant's control, the Tribunal ruled in favor of setting aside the penalties due to the timely full payment made by the appellant.

In conclusion, the judgment addressed various legal aspects, including compliance with payment deadlines, interpretation of rules, applicability of penalties, and the significance of intent to evade payment of duty in penalty imposition. The decision to set aside the penalties was based on the appellant's timely full payment before the issuance of the show cause notice, aligning with relevant legal precedents and interpretations of the rules involved.