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2014 (3) TMI 488 - AT - Central ExciseDefault in payment of duty - restriction on utilizing cenvat credti under Rule 8(3A) - Violation of first proviso to sub-rule 4 of Rule 3 of Cenvat Credit Rules, 2004 - Assessee showed that duty was paid in cash through Account Current even though no such amount was paid by them. On 25.11.2010, they adjusted the said amount from the Credit of Inputs etc. - Non clearance of the consignments paying the excise duty for each consignment at the time of removal without utilizing Cenvat credit - Clearance of the goods without paying consignment-wise duty - Held that - Rule 8(3A) is specifically prohibits utilization of cenvat credit during the period in which default continues, we are of the view that even when the said amount is required to be paid as arrears of revenue the same have to be paid in cash without utilization of the cenvat credit. Any other interpretation will make the restriction relating to utilization of credit meaningless. It is settled law that what is not allowed directly cannot be allowed/claimed indirectly. Board s circular dated 28 th March, 2012 will not be applicable in view of reasons stated earlier. We, therefore, hold that the appellants are required to pay an amount of ₹ 8,00,09,346 which is equivalent to the cenvat credit utilized during the period 6.12.2010 to 4.7.2011 in cash. They will, however, be free to take cenvat credit of equivalent amount and utilize it for future clearances. - Demand alongwith interest confirmed - Decided against the assessee.
Issues Involved:
1. Default in payment of Central Excise duty. 2. Utilization of Cenvat Credit during the default period. 3. Consequences of non-compliance with Rule 8(3A) of the Central Excise Rules, 2002. 4. Validity of show-cause notices and demands for duty. 5. Imposition of penalties and redemption fines. Detailed Analysis: 1. Default in Payment of Central Excise Duty: The appellants, manufacturers of printed and laminated plastic films, defaulted in paying Central Excise duty for October 2010. They were required to pay Rs.1,51,21,904/- by 5.11.2010 but only adjusted Rs.1,43,29,033/- from the Credit Account, leaving a balance of Rs.7,92,871/- which was falsely reported as paid in cash. This amount was eventually paid in cash on 4.6.2011, with interest paid on 5.7.2011. 2. Utilization of Cenvat Credit During the Default Period: During the default period (6.12.2010 to 4.7.2011), the appellants continued to clear goods using Cenvat credit, contravening Rule 8(3A) which mandates payment of duty for each consignment without utilizing Cenvat credit until the outstanding amount and interest are paid. 3. Consequences of Non-Compliance with Rule 8(3A): The appellants' failure to comply with Rule 8(3A) led to a show-cause notice demanding Rs.8,00,09,346/- equivalent to the Cenvat credit utilized during the default period. Another notice demanded Rs.13,12,25,602/- for the period 5.7.2011 to 31.3.2012, arguing that the default continued as the earlier amount was not paid in cash. 4. Validity of Show-Cause Notices and Demands for Duty: The Tribunal rejected the appellants' contention that the default was rectified by debiting the Cenvat Credit account on 25.11.2010, citing the first proviso to Rule 3(4) of the Cenvat Credit Rules, 2004. The Tribunal upheld the demand for Rs.8,00,09,346/- to be paid in cash, allowing the appellants to take equivalent Cenvat credit for future clearances. The second show-cause notice was set aside as the non-payment was considered arrears of revenue, not a default in monthly payment. 5. Imposition of Penalties and Redemption Fines: The Tribunal set aside the confiscation and imposition of redemption fine, referencing the Larger Bench decision in Shiv Kripa Ispat Pvt. Ltd. and the Gujarat High Court's judgment in Saurashtra Cement Ltd., which held that no penalty under Rule 25 can be imposed in such circumstances. Penalty under Rule 27 was deemed appropriate. Conclusion: The Tribunal's judgment required the appellants to pay Rs.8,00,09,346/- in cash for the default period while allowing future utilization of equivalent Cenvat credit. The second show-cause notice was invalidated, and penalties and fines were adjusted per judicial precedents. The judgment emphasized strict adherence to Rule 8(3A) and the proper utilization of Cenvat credit.
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