2012 (9) TMI 240 - AT - Central Excise

Due date for payment of duty u/r Rule 8(3A) - SSI Unit - forfeiture of facility of utilization of cenvat credit - they opted to go out of the small-scale exemption scheme - held that - during the impugned period, an assessee could discharge duty liability either out of PLA or by utilizing CENVAT Credit. Only with effect from 1-6-2006, Rule 8(3A) has been amended specifically providing for payment of excise duty without utilizing the CENVAT Credit. - the Appellants cannot be faulted for having paid duty for the period, 20-10-2005 to 19-12-2005 by utilizing CENVAT Credit. As regards the secondary contravention of not paying the duty consignmentwise Held that - Appellants bona fide belief that since paragraph 2(i) of the small-scale exemption Notification No. 8/2003-C.E., dated 1-3-2003 was merely a condition of the small-scale exemption, they were entitled to opt out of the same, but they were still qualifying under the criteria of the small-scale exemption and hence, they were entitled to pay duty by the 15th day of the following month - Their bona fide belief is reflected in various correspondences they have made to the jurisdictional Commissioner as well as to the Member, Central Excise in the Board - penalty reduced - penalties have been imposed both on the Appellant Managing Director and Appellant Executive Director of the Appellant Company, which are not warranted

Summary

Issues:
Violation of Rule 8(1) regarding duty payment schedule; Dispute over duty payment method during a specific period; Imposition of penalty on the appellant; Validity of penalties on the Managing Director and Executive Director.

Analysis:
Issue 1: The appellant opted out of the small-scale exemption scheme and failed to pay duty for May 2005 by the due date, leading to a dispute over the duty payment schedule as per Rule 8(1). The Original Authority ordered duty forfeiture without following natural justice principles, but subsequent amendments allowed duty payment using CENVAT Credit.

Issue 2: The dispute arose regarding duty payment method during a specific period (20-10-2005 to 19-12-2005) when the appellant used CENVAT Credit instead of cash as per an earlier order. The Tribunal and the Bombay High Court decisions supported duty payment through CENVAT Credit, absolving the appellant of the primary charge of non-payment.

Issue 3: The penalty imposed on the appellant was reduced from Rs. 50,000 to Rs. 5,000 due to the appellant's belief based on the exemption condition, although legally incorrect. Penalties on the Managing Director and Executive Director were deemed unwarranted and set aside, considering the circumstances and legal interpretations.

Final Decision: The tribunal partly allowed the appeal by setting aside duty and interest demands, reducing the penalty to Rs. 5,000, and overturning penalties on the Managing Director and Executive Director. The judgments of the Larger Bench of the Tribunal and the Bombay High Court played a crucial role in determining the correct application of duty payment methods and penalties in this case.