2013 (8) TMI 614 - HC - Central Excise

Belated payment of duty - Restriction on utilizing CENVAT credit - Rule 8 of central excise rules - appellant submitted that the Department directed the appellant to pay the sum of ₹ 53,62,822/-, without affording any opportunity to the appellant as no show cause notice was issued and straight away a demand was served on the appellant. - Principles of Natural Justice - Assesse cited financial crises and did not remit the Central Excise Duty. Held that - The revenue shall issue a show cause notice to the assesse clearly indicating the defaulted amount together with interest and the appellant shall be entitled to submit their reply to the show cause notice and thereafter the respondents shall pass orders on merits and in accordance with law - Assesse should be put on some terms before the Department was directed to issue a show cause notice to the assesse - before the quantifying the total amount the department ought to have issued a show notice to the appellant clearly setting out the period of default, the amount payable, the interest payable on the said amount and afford an opportunity to the appellant.

Summary

Issues:
1. Challenge against order directing payment of duty without utilizing Cenvat credit.
2. Violation of principles of natural justice in issuing demand without show cause notice.
3. Interpretation of Rule 8(3-A) of the Central Excise Rules.
4. Justification for the Department's actions in demanding payment.

Analysis:

Issue 1:
The appellant challenged the order directing payment of duty without utilizing Cenvat credit. The appellant cited financial crises for the delayed payment of Central Excise Duty. The respondents demanded payment without giving credit for the duty paid using Cenvat credit, leading to non-payment reflection in the accounts. The Court held that Rule 8(3-A) restricts using Cenvat credit until the entire outstanding amount, including interest, is paid.

Issue 2:
The appellant argued a lack of opportunity as no show cause notice was issued before demanding payment. The Department justified its actions, stating repeated instructions were given to the appellant regarding duty payment. The Court noted that while the appellant was aware of the duty amount, issuing a show cause notice was necessary before quantifying the total amount owed.

Issue 3:
The Court discussed Rule 8(3-A), emphasizing that if an assessee defaults in duty payment beyond thirty days, they must pay duty without utilizing Cenvat credit until the outstanding amount is settled. The Department's communications highlighted the appellant's assurance not to use Cenvat credit until dues were cleared, indicating knowledge of the situation.

Issue 4:
The Department's actions were scrutinized regarding the lack of a show cause notice before demanding payment. The Court acknowledged the appellant's awareness of the duty owed but emphasized the necessity of formal notice specifying the default period and amount payable. The Court directed the appellant to pay a sum and ordered the Department to issue a show cause notice, allowing the appellant to respond before passing final orders.

In conclusion, the Court directed the appellant to make a payment and instructed the Department to issue a show cause notice for the defaulted amount. The judgment balanced the appellant's need for opportunity to respond with the Department's duty to ensure compliance with Central Excise Rules.