2014 (2) TMI 592 - AT - Central Excise

Default in payment of duty - Rule 8 (3A) of the Central Excise Rules, 2002 - Default continued for more than 30 days - Held that - Rule 8 (3A) of the Cenvat Credit Rules, provides that if the appellant had defaulted in payment of duty and if the default continues for more than 30 days, in subsequent clearances of excise goods, duty liability has to be discharged through PLA and amount lying in Cenvat Credit amount cannot be utilised for payment of duty. If the contention of the appellant is accepted, the provisions of 8(3A) of the Central excise Rules, 2002 would be rendered otiose. It is a well settled position of law that statutory provisions should not be interpreted in such a way as to make the provisions a nullity or surplusage - However, liability should be only ₹ 2.22 crore, which can be verified subsequently at the time of final hearing - Conditional stay granted.

Summary

Issues involved:
Violation of Rule 8 (3A) of the Central Excise Rules, 2002 - Utilization of Cenvat Credit for payment of excise duty during default period.

Analysis:

Issue 1: Violation of Rule 8 (3A) of the Central Excise Rules, 2002
The appellant, a manufacturer of iron and steel products, defaulted in payment of excise duty for more than 30 days during the period of November to March 2012. As per Rule 8 (3A) of the Central Excise Rules, 2002, during such default period, the appellant was required to discharge excise duty liability through PLA without utilizing any Cenvat Credit. However, the appellant utilized Cenvat Credit amounting to Rs. 3,15,54,953/-, leading to a show-cause notice proposing to deny this credit and seeking recovery. The appellant argued financial crisis and lack of liquidity as reasons for using Cenvat Credit, claiming no intention to evade duty. The appellant relied on a Tribunal decision stating that once the default is rectified, there is no bar on utilizing Cenvat Credit. However, the Revenue contended that utilizing Cenvat Credit during default was invalid as per Rule 8 (3A) and cited judicial precedents to support this position.

Analysis of the Judgment:
The Tribunal analyzed the statutory provisions of Rule 8 (3A) and noted that if the appellant's contention were accepted, it would render the rule meaningless. Referring to judgments of the High Courts of Karnataka and Madras, the Tribunal emphasized that during a default period exceeding 30 days, excise duty must be paid through PLA, and Cenvat Credit cannot be availed. The Tribunal held that the decisions of the High Courts overruled the Tribunal's earlier decision, and the appellant's argument based on the Tribunal's precedent was not valid. However, the Tribunal accepted the appellant's contention regarding the computation of the duty demand, reducing the liability to Rs. 2.22 crore instead of Rs. 2.37 crore as confirmed in the impugned order.

Conclusion:
The Tribunal directed the appellant to make a pre-deposit of Rs. 2.22 crore through PLA within eight weeks. Upon compliance, the balance of dues would be waived, and recovery stayed during the appeal. The appellant would be allowed to take credit of the deposited amount in the Cenvat Credit account. The Tribunal's decision balanced the statutory provisions with the appellant's financial circumstances, providing a resolution while upholding the legal requirements.