2018 (1) TMI 257 - AT - Central Excise

Utilization of CENVAT credit account - vires of Rule 8 (3A) - Held that - since utilization of Cenvat credit account, during the default period has been declared ultra vires, therefore the appellant has not violated the provisions of Rule 8 (3A) of Central Excise Rules, 2002. If the availability of Cenvat credit is taken into account, in that circumstance, no demand is sustainable against the appellant. Confiscation - redemption fine - Held that - although during the defaulted period, the appellant has violated the provision of Rule 8 (3A) which has been declared ultra vires, in that circumstance, the credit can be utilized but under the said provisions, the goods are to be cleared on consignment wise, therefore, the goods are liable for confiscation. As the goods are not available for confiscation and not cleared under any bond, therefore, redemption fine cannot be imposed on the appellant - redemption fine set aside. Penalties u/r 25 & 26 of the CER, 2002 - Held that - As the penalty under these rules can be imposed subject to the condition of section 11AC of the Act but the ingredients of section 11AC are missing. Therefore, the penalties under Rule 25 and 26 are not imposable on the appellant. Penalty u/r 27 - Held that - as per Rule 8 (3A) of Central Excise Rules, 2002 as they were not paying duty on consignment wise, in that circumstance, during the defaulted period, the penalty is imposable. For such default, the provisions are invokable of Rule 27 of the Central Excise Rules, 2002 which prescribes a penalty of ₹ 5,000/- during the period in default can be imposed on the appellant - penalty on main appellant i.e. M/s.Ess Ess Kay Engg. Co.Pvt.Ltd. upheld. Appeal disposed off.

Summary

Issues:
Appeal against order demanding duty, interest, redemption fine, and penalties for default in duty payment and utilization of Cenvat credit account.

Analysis:
1. The appellants contested the demand of duty, interest, redemption fine, and penalties imposed on them for defaulting in duty payment and utilizing the Cenvat credit account during the default period. The proceedings were initiated based on the observation that the appellants used the Cenvat credit account during the default period for duty payment, which was in violation of Rule 8(3A) of the Central Excise Rules, 2002. A show cause notice was issued, leading to the confirmation of duty demand, interest imposition, goods confiscation, and penalties under Rule 25 & 26 of the Central Excise Rules, 2002. The appellants challenged this order.

2. The appellants argued that the provisions of Rule 8(3A) regarding credit admissibility during default were declared ultra vires by the Hon'ble Gujarat High Court and the decision was upheld by the Hon'ble Delhi High Court. They contended that since the decision was not binding, the demands should be set aside. They also claimed that no redemption fine should be imposed as the goods were not available for confiscation. Moreover, they argued that penalties under Rule 25 & 26 were not applicable due to the absence of fraud or suppression of facts.

3. The Appellate Tribunal considered the arguments presented by both parties. It noted that the provisions of Rule 8(3A) had been declared ultra vires by the Hon'ble Gujarat High Court and the decision was upheld by the Hon'ble Delhi High Court. As the decision was not set aside, the demands based on the utilization of Cenvat credit account during the default period were set aside. The Tribunal confirmed the duty payment with interest but overturned the redemption fine imposed on the appellants.

4. The Tribunal further held that penalties under Rule 25 & 26 were not applicable as the conditions of section 11AC of the Act were not met. However, considering the default in paying duty on a consignment-wise basis during the default period, a penalty of ?5,000 was imposed on the main appellant under Rule 27 of the Central Excise Rules, 2002. Consequently, the penalties under Rule 25 & 26 were set aside, and a penalty of ?5,000 was imposed on the main appellant.

5. The Tribunal disposed of the appeals based on the above analysis, setting aside the demands, redemption fine, and penalties under Rule 25 & 26, while imposing a penalty under Rule 27.