2018 (12) TMI 364 - AT - Central Excise

Default in payment of duty - denial of right to use the cenvat credit account for payment of duty - the entire case of the Revenue is that on account of default in payment of duty for the period from August, 2007 to November, 2007 the appellant have lost their right to use the cenvat credit account, for payment of duty - Rule 8(3A) of the Central Excise Rules - Time Limitation - penalty. Held that - The said issue stands considered by the Tribunal in the latest decision in the case of M/s Bakewell Agro Ltd. and others V/s CCE, Meerut-I 2018 (12) TMI 156 - CESTAT ALLAHABAD , it stands held that the assessee was entitled to use the cenvat credit for payment of duties of their final product even during the period of default. Time limitation - Held that - The appellant debited their cenvat credit account at the instance of the visiting officers in December, 2007. Such entries made by the appellant were indicated to their Range Officer as well. No objection was raised by the Revenue at that point of time. A show cause notice issued after a period of 3-4 years by invoking the extended period cannot be uphold - As such apart from the merits of the case, the demand is also barred by limitation. Penalty - Held that - It is seen that a further demand to the tune of ₹ 9,651 and of ₹ 25.158/- stands confirmed which were also debited by the appellant from their Cenvat Credit account. Inasmuch as the said demand is accepted by the appellant, we find no reasons to set aside the same. However, penalty on the said two grounds are set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 8(3A) of the Central Excise Rules regarding the use of cenvat credit for payment of duty.
2. Validity of the show cause notice issued after a significant period.
3. Imposition of penalty on the appellant and the authorized signatory.

Analysis:
1. The Tribunal considered the case where the appellant, engaged in manufacturing electronic items, had not paid central excise duty for a specific period. The Revenue contended that due to the default in duty payment, the appellant could not use cenvat credit for subsequent duty payments under Rule 8(3A). However, the Tribunal referred to a precedent decision in the case of M/s Bakewell Agro Ltd. and others, where it was held that the assessee could use cenvat credit even during a default period. Thus, the issue was found in favor of the appellant on merit.

2. The Revenue initiated proceedings against the appellant through a show cause notice issued after a significant delay. The Tribunal noted that the appellant had debited their cenvat credit account as per the officers' instructions in 2007, and no objections were raised by the Revenue at that time. Considering the extended period between the alleged default and the notice, the Tribunal held that the demand was barred by limitation, apart from the merits of the case.

3. The Commissioner's order confirmed the duty demand from the appellant, along with interest and penalties. However, the order did not mention the debit entry made by the appellant towards dues from their cenvat credit account. The Tribunal upheld a small amount of additional duty confirmed by the appellant but set aside the penalty imposed in those instances. Moreover, based on allowing the appeal of another party, M/s L. B. Electronics Ltd., the Tribunal set aside the penalty imposed on the authorized signatory, Shri Satbeer Singh, and allowed his appeal as well.

In conclusion, the Tribunal dismissed the appeal for the main duty demand, citing the appellant's right to use cenvat credit during the default period and the limitation on the show cause notice. However, it upheld a minor additional duty demand while setting aside related penalties.