2004 (10) TMI 181 - AT - Central Excise

Summary

Issues:
1. Failure to pay duty within prescribed time leading to forfeiture of facility.
2. Applicability of Cenvat credit for payment of duty.
3. Interpretation of Rule 8(4) of Central Excise Rules.
4. Intent to evade payment of duty and imposition of penalty.

Issue 1: Failure to pay duty within prescribed time leading to forfeiture of facility
The appellants failed to pay duty within the prescribed time for the first fortnight of September 2001 and both fortnights of October 2001. Consequently, the jurisdictional Dy. Commissioner ordered the forfeiture of the facility. The forfeiture was for a period of two months starting from 4-12-2001. The appellants partially paid duty through debits in PLA and Cenvat account during this period. The department objected to the part-payment through Cenvat account, leading to a show-cause notice, demand of duty with interest, and a penalty.

Issue 2: Applicability of Cenvat credit for payment of duty
The appellants argued that they were entitled to utilize Cenvat credit for duty payment under Rule 3(3) of the Cenvat Credit Rules, 2001, and that this right was not curtailed by Rule 8(4) of the Central Excise Rules. The department contended that the special provision of Rule 8(4) should prevail over the general provision of Rule 3(3). The Tribunal agreed with the department's interpretation, citing a Bombay High Court ruling that emphasized the mandatory nature of compliance with Rule 8(1).

Issue 3: Interpretation of Rule 8(4) of Central Excise Rules
Rule 8(4) of the Central Excise Rules prescribes penalties for default in payment of duty during the period of forfeiture of the fortnightly facility. It requires payment through debit to the account current, which in this case was the PLA. The appellants did not fully comply with this requirement by partially using Cenvat account for duty payment. The Tribunal upheld the penalty provision of Rule 8(4) and emphasized the penal consequences of not adhering to the prescribed payment method during the forfeiture period.

Issue 4: Intent to evade payment of duty and imposition of penalty
The appellants demonstrated their intent to comply with duty payment obligations through correspondence with the department. The letters indicated a willingness to pay duty from Cenvat and PLA accounts and a proactive approach to discharge the duty liability. The Tribunal noted the absence of evidence suggesting an intent to evade payment. Consequently, it held that the penalty imposed on the appellants under Rule 25 of the Central Excise Rules should be vacated.

In conclusion, the Tribunal upheld the liability of the appellants to pay duty through PLA debit during the forfeiture period but set aside the penalty. The appellants were directed to pay the duty with interest in cash within a specified period, allowing them to recredit the duty debited in the Cenvat account during the forfeiture period.