2015 (6) TMI 302 - AT - Central Excise

Denial of CENVAT Credit - Failure to pay duty due to clerical mistake - Held that - The only basis of the duty demands against the appellant is that during the period of default beyond 30 days from the due date the appellant were required to pay duty on the clearances during that period without utilizing the Cenvat credit. However, we find that Hon ble Gujarat High Court 2014 (12) TMI 585 - GUJARAT HIGH COURT in the judgment mentioned above has struck down above mentioned condition contained in sub-rule (3A) of Rule 8 requiring that during the forfeiture period an assessee would be required to pay duty without utilizing the Cenvat credit. We are therefore, of the prima-facie view that the impugned order is not correct and as such the appellant have strong prima-facie case in their favour. The requirement of pre-deposit of the duty demand, interest and penalty is therefore, waived for hearing of the appeal and recovery thereof is stayed during pendency of the appeal - Stay granted.

Summary

Issues:
1. Interpretation of Rule 8 of the Central Excise Rules 2002 regarding payment of duty.
2. Applicability of Cenvat credit for payment of duty during default period.
3. Validity of Commissioner's order confirming duty demand, interest, and penalty.

Analysis:
1. The appellant, a manufacturer of motor vehicle parts, availed Cenvat credit of central excise duty paid on inputs under service tax. As per Rule 8 of the Central Excise Rules 2002, the assessee was required to pay the duty self-assessed by them for goods cleared by the 5th of the next month. Failure to discharge duty liability beyond one month from the due date would result in forfeiture of the facility to pay duty on a monthly basis and utilize Cenvat credit for payment.

2. The appellant had short payments in August and September 2011 due to clerical errors. The Department detected the short payments during scrutiny of returns. The Department contended that during the default period, the appellant was required to pay duty consignment-wise without utilizing Cenvat credit. The Commissioner confirmed a demand of Rs. 1,19,71,942 along with interest and imposed a penalty of Rs. 10,00,000. The appellant challenged this order.

3. The appellant argued that the condition in Rule 8(3A) requiring payment without utilizing Cenvat credit during the forfeiture period was unconstitutional. They cited a judgment of the Hon'ble Gujarat High Court that rendered this condition invalid. The Tribunal found merit in the appellant's argument, stating that the impugned order was not correct based on the Gujarat High Court judgment. The requirement of pre-deposit of duty demand, interest, and penalty was waived, and recovery stayed during the appeal.

This judgment highlights the importance of interpreting statutory rules, the applicability of Cenvat credit during default periods, and the impact of judicial decisions on administrative orders. The Tribunal's decision to waive the pre-deposit requirement showcases the significance of legal precedents in shaping tax liabilities and procedural obligations.