2014 (2) TMI 164 - AT - Central Excise

Violation of provisions of Rule 8(3A) of Central Excise Rules, 2002 - Penalty u/s 11AC - Delay in duty payment Availment of CENVAT Credit - difference of opinion - Held that - matter referred to larger bench with the following questions Whether payment of duty arising out of default, is to be paid thought Cenvat credit and pre-deposit of penalty is to be restricted to Rs.5,000/- held by Member (Judicial) based on judgment of Hon ble Gujarat High Court in the case of Saurashtra Chemicals. - Or Whether payment of duty arising out of default, is to be paid through cash/current account as per provisions of Rule 8 and Rule 8(3A) based on Gujrat High Court Judgment Harish Silk Industries 2013 (6) TMI 83 - GUJARAT HIGH COURT and Hon ble Madras High Court judgment in the case of Unirols Airtex Vs. Assistant Commissioner Coimbatore 2013 (12) TMI 1398 - MADRAS HIGH COURT and in view of mis-presentation and fraud, pre deposit of Rs.25 lakhs is to be directed as held by Member (Technical).

Issues Involved:
1. Payment of confirmed duty demand through Cenvat credit.
2. Liability to pay interest on late payment of duty.
3. Imposition of penalty for violation of Central Excise Rules.
4. Allegations of fraudulent actions and misrepresentation by the appellant.

Issue-wise Detailed Analysis:

1. Payment of Confirmed Duty Demand through Cenvat Credit:
The tribunal observed that the appellant had deposited Rs. 16.70 lakh through Cenvat credit out of the total confirmed demand of Rs. 88,80,952/-. The revenue objected, arguing that the amount should have been paid in cash. However, the tribunal referred to decisions in the cases of Solar Chemferts Pvt. Ltd. and Baba Vishkarma Engg. Co (P) Ltd., which held that such deposits through Cenvat credit during the default period would only result in the confirmation of interest to the revenue. The tribunal accepted the deposit made through Cenvat credit as valid towards duty payment and held that the entire duty stood paid by the appellant.

2. Liability to Pay Interest on Late Payment of Duty:
The tribunal noted that the appellant was liable to pay interest due to the late deposit of the amount as per Rule 8(3A) of the Central Excise Rules, 2002. Although the interest was confirmed in the impugned orders, it had not been quantified. The tribunal directed the revenue to quantify the interest amount and instructed the appellant to deposit the same within eight weeks from the date of quantification.

3. Imposition of Penalty for Violation of Central Excise Rules:
The tribunal acknowledged that the violation of Rule 8 attracts penal provisions under Rule 27 of the Central Excise Rules, as per the Gujarat High Court's decision in CCE vs. Saurashtra Cement Ltd. The tribunal directed the appellant to deposit a penalty amount of Rs. 5000/- within the specified period, subject to which the penalty imposed would be dispensed with and its recovery stayed.

4. Allegations of Fraudulent Actions and Misrepresentation by the Appellant:
One member of the tribunal, while concurring with the findings on the payment of interest, disagreed on the issues of duty payment through Cenvat credit and the imposition of penalty. The member highlighted that the case involved fraudulent actions, where the appellant had issued cheques without sufficient bank balance and submitted bogus counterfoils. The tribunal noted that the appellant had defaulted in duty payments for several months and had misled the department by declaring duty payments in their monthly ER-1 returns without actually paying them. The tribunal emphasized that the appellant's actions were deliberate and intended to deceive the department.

The tribunal referred to Rule 8(3A) of the Central Excise Rules, which stipulates that in case of default beyond thirty days, the assessee must pay excise duty for each consignment at the time of removal without utilizing the Cenvat credit until the outstanding amount, including interest, is paid. The tribunal also cited judgments from the Gujarat High Court in Harish Silk Industries and the Madras High Court in Unirols Airtex, which held that compliance with Rule 8 is mandatory and that duty payments during default periods must be made in cash or through a current account, not Cenvat credit.

Given the fraudulent actions and misrepresentation, the tribunal found that the appellant's conduct warranted a penalty under Rule 25 read with Section 11AC. The tribunal directed a pre-deposit of Rs. 25 lakh as a condition for hearing the appeal and required the amount paid through Cenvat credit to be paid through the PLA/current account.

Conclusion:
The tribunal issued a split decision on whether the duty payment during the default period could be made through Cenvat credit or must be paid in cash/current account. One member held that the payment through Cenvat credit was acceptable, while the other insisted on cash payment due to the fraudulent actions and misrepresentation by the appellant. The matter was to be resolved based on the legal precedents and the specific facts of the case.

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