2009 (7) TMI 413 - AT - Central Excise

Appellants defaulted in payment of duty which was required to be paid by 5th of the following month Duty paid from Cenvat account instead of PLA Since appellant agrees to pay the duty out of PLA, subject to reversal of entry in Modvat account, permission is given for the same - In terms of Rule 8(3A), the goods cleared in such a way have to be treated as having been cleared without payment of duty and the consequences and penalties as provided in Rule 25 of Central Excise Rules shall follow. As such, it is seen that the penalties provided in terms of Rule 25 of Cenvat Excise Rules, would apply and not Section 11AC, as has been done by Commissioner (Appeals). Keeping in view the overall facts and circumstances of the case, penalty of Rs. 15,000/- originally imposed by the Assistant Commissioner is treated as sufficient. The appellate authority s order enhancing the penalty to the extent of 100% in terms of Section 11AC is set aside.

Summary

Issues:
1. Interpretation of Rule 8(3A) of Cenvat Credit Rules, 2002 regarding duty payment.
2. Applicability of penalty under Section 11AC of the Central Excise Act, 1944.
3. Correctness of penalty imposition under Rule 25 of Central Excise Rules.

Analysis:
1. The appellant, engaged in manufacturing Petroleum Jelly and chemicals, availed Cenvat credit for duty paid on inputs but defaulted in duty payment from May to September 2007. The Assistant Commissioner initially held that duty paid from Cenvat account need not be confirmed again, citing a Mumbai High Court decision equating Cenvat credit usage to duty payment. However, the Commissioner (Appeals) reversed this, emphasizing Rule 8(3A) requiring cash duty payment for goods removed, treating Cenvat-paid goods as cleared without duty payment. The Tribunal upheld this, confirming duty demand, interest, and penalty.

2. The Assistant Commissioner did not impose penalty under Section 11AC due to no duty demand, while the Commissioner (Appeals) enhanced penalty under Rule 25. The Tribunal noted that penalties under Cenvat Excise Rules, not Section 11AC, apply. Considering the circumstances, the original penalty of Rs. 15,000 was deemed sufficient, overturning the enhanced penalty.

3. The appellant agreed to pay duty from PLA, reversing the Modvat entry. The Tribunal directed duty deposit from PLA, allowing corrective Modvat entry. While interest and penalty aspects were confirmed from the Assistant Commissioner's order, the penalty under Rule 25 was considered appropriate, setting aside the enhanced penalty under Section 11AC by the appellate authority. The appeal was disposed of accordingly, with penalties applied as per Cenvat Excise Rules.