2013 (9) TMI 518 - AT - Central Excise

Penalty when there is contravention of Rule 8(3A) of Central Excise Rules Facility to pay monthly duty was forfeited because non-payment of duty by the due date under Rule 8 of the Central Excise Rules, 2002 Held that - When the period of delay in discharge of monthly duty liability by the due date exceeds 30 days from the due date, the assessee looses the facility to pay duty on monthly basis and is required to pay duty on each clearance and that too through PLA without utilising the Cenvat credit. Rule 8 (3A) specifically provides that if during the forfeiture period, the duty is not paid consignmentwise or is paid by utilising Cenvat credit in respect of certain goods cleared, such clearances would be deemed to have been made without payment of duty and all the consequences for the same as prescribed in the Central Excise Rules, would follow. In the instant case, even during forfeiture period, the duty had not been paid through PLA and had been paid through Cenvat credit, the appellant have been correctly directed to pay the same through PLA. Once the duty is paid through PLA, they would be entitled for re-credit of Cenvat credit earlier utilized - Goods were cleared on payment of duty through Cenvat credit account, the same would be deemed to have been cleared without payment of duty and, hence, the provisions of Rule 25 would be attracted Decided against the Assessee. Penalty u/r 25 for delay in filing return E.R.-1 Held that - Delay in filing of ER-1 return, would attract penalty under Rule 27 not under Rule 25 and therefore Penalty of Rs.2000/- will be imposed.

Summary

Issues: Failure to discharge duty liability on time, applicability of Rule 8 (3A), forfeiture of facility to pay duty monthly, clearance of goods without payment of duty, penalty imposition under Rule 25, delay in filing ER-1 return, applicability of penalty under Rule 27.

Failure to discharge duty liability on time:
The appellant failed to discharge duty liability for April, May, and June 2007 by the due date as per Rule 8 of the Central Excise Rules, 2002. The duty for these months was paid with interest from January to March 2008. The department contended that due to the delay exceeding 30 days, Rule 8 (3A) applied, resulting in the forfeiture of the monthly duty payment facility, necessitating duty payment consignment-wise through PLA. A show cause notice was issued for duty payment during the forfeiture period, leading to penalty imposition under Rule 25.

Applicability of Rule 8 (3A) and forfeiture of facility to pay duty monthly:
Rule 8 (3A) mandates that if the delay in discharging monthly duty liability exceeds 30 days, the assessee loses the monthly duty payment facility and must pay duty consignment-wise through PLA, without utilizing Cenvat credit. Failure to pay duty through PLA during the forfeiture period results in goods being deemed cleared without duty payment, invoking consequences under the Central Excise Rules. The appellant was correctly directed to pay the disputed amount through PLA, as payment through Cenvat credit during forfeiture deems goods cleared without duty payment, justifying penalty imposition under Rule 25.

Clearance of goods without payment of duty:
The appellant cleared goods during the forfeiture period without paying duty consignment-wise through PLA, instead using Cenvat credit. Such clearance without proper duty payment triggers the provisions of Rule 25, leading to penalty imposition. The judgment emphasizes the importance of adhering to duty payment regulations to avoid deemed clearance without payment of duty.

Penalty imposition under Rule 25 and Rule 27:
The Assistant Commissioner imposed penalties under Rule 25 for failure to pay duty consignment-wise through PLA and for delay in filing the ER-1 return. The judgment clarifies that delay in filing the ER-1 return warrants a penalty under Rule 27, not Rule 25. The penalty under Rule 25 was reduced from Rs. 1,00,000 to Rs. 25,000, and the penalty for ER-1 return delay was reduced to Rs. 2,000, considering the circumstances of the case.

Conclusion:
The judgment upholds the impugned order, emphasizing compliance with duty payment regulations, especially during forfeiture periods. It clarifies the correct application of penalties under specific rules and highlights the consequences of failing to pay duty consignment-wise through PLA. The modifications in penalty amounts reflect a balanced approach considering the case's circumstances.