2012 (9) TMI 814 - AT - Central Excise

Waiver of pre-deposit consignment wise payment of duty in cash - rule 8(3A) - alleged that Appellant did not pay the duty payable by cash, as per their ER-1 return by the due date - Neither did they pay it with interest Held that - Department has not taken the initiative to make use of the provisions regarding confiscation since no seizure has been effected. So the only consequence will be penalty - there is no case for demanding the duty paid through Cenvat credit to be paid again through cash/PLA - there is no case for imposing penalty equal to duty defaulted - Appellant should make a deposit of Rs. 10,000/- towards penalty and interest payable

Summary

Issues:
Non-payment of duty by the Appellant within the specified timeframe leading to penal consequences under Rule 8(3A) of the Central Excise Rules, 2002. Challenge to the validity of Rule 8(3A) in a writ petition. Dispute regarding the recovery of duty already paid and demand for interest. Invocation of penalties under Section 11AC of the Act. Interpretation of consequences and penalties under the Act and Rules for clearances made without proper discharge of duty.

Analysis:
The Appellant failed to pay the duty by the due date for the months of Oct. 2006, Nov. 2006, and Dec. 2006, resulting in a defaulting period. Rule 8(3A) mandates duty payment without utilizing CENVAT credit during default, a condition the Appellant did not adhere to. The Revenue demanded duty, interest, and imposed a penalty under Section 11AC based on CENVAT credit utilized during the defaulting periods, leading to the Appellant's appeal before the Tribunal.

The Appellant raised multiple contentions, including challenging Rule 8(3A) in a writ petition, disputing the recovery of already paid duty, questioning the legality of interest demand, and arguing against penalty imposition under Section 11AC. The core argument focused on potential double payment of duty if duty demanded in cash is paid again and CENVAT credit amount is not refunded, highlighting the absence of legal provision for dual duty collection.

Rule 8(3A) requires duty payment on each consignment during default without CENVAT credit usage, a requirement violated by the Appellant. The Rule's penal consequences apply to breaches within the Rules, not extending to penalties under the Act. The judgment clarifies that Act's consequences for duty non-payment include duty recovery, interest, penalty, and confiscation, with Rule 8(3A) specifying penalties under the Rules only.

The Tribunal's analysis emphasizes that during the defaulting period, payment through CENVAT credit is disallowed, necessitating cash payment for duty. The judgment distinguishes between Act and Rule consequences, indicating interest payment until proper duty discharge. Notably, the Gujarat High Court precedent limits penalties to Rule 27 in such cases, not invoking Rules 25 and 26.

Ultimately, the Tribunal ruled in favor of the Appellant, ordering a nominal penalty deposit and interest payment while waiving the balance demands for appeal admission. The decision instructed pre-deposit within a specified timeframe, with compliance reporting mandated accordingly.