2015 (9) TMI 934 - AT - Central Excise

Waiver of pre deposit - restriction on utilisation of Cenvat credit due to delay in payment of duty - violation of provisions of Rule 8(A) of Central Excise Rules, 2002 - Imposition of penalty - Difference of opinion - Majority order - Held that - Language of Rule 8 (3A), it is clear that it is non-obstinate provision which operates notwithstanding anything contained in sub-Rule (1) and sub-Rule (4) of Rule 3 of Cenvat Credit Rules, 2004 and, hence, the provisions of Rule 8 (3A) of Central Excise Rules, 2002 would have over-writing effect over the provisions of Cenvat Credit Rules, 2004. In this judgment, it was further observed that the intention of sub-Rule (3A) of Rule 8 is to punish an assessee defaulting in discharge of monthly duty liability beyond the period of 30 days from the due date by denying the utilisation of Cenvat credit and making him pay the duty consignmentwise, as in most of such cases, while the defaulting assessee has not paid duty on the goods cleared during a particular month, on the basis of the invoices issued by him his customers would have taken the Cenvat credit resulting in double loss to the Government. - appellant would be required to pay duty of ₹ 16.70 lakhs through cash and on payment of this amount through cash, they can re-credit the amount of ₹ 16.70 lakhs debited earlier in their Cenvat credit account for payment of duty. While the appellant company, in the ER-1 returns filed by them, had reported the payment of self assessed duty, 18 cheques for payment of duty amounting to ₹ 34,37,391/- presented by the appellant company to the bank were not honoured due to insufficient balance in his account and in respect of 13 cheques for payment of duty amounting to ₹ 26,26,500/- whose particulars were mentioned in the returns, had never been presented to the bank. The act of dishonouring of 18 cheques of an amount of ₹ 34,37,391/- and not presenting the cheques for an amount of ₹ 26,26,500/- was never reported by the appellant company to the Department and, as such, this fact, has prima facie, been concealed. This conduct of the appellant, prima facie, would amount to clearance of goods without any intention to pay the duty and, as such, in such a situation, the judgment of Hon ble Gujarat High Court in the case of CCE & Customs vs. Saurashtra Cement Ltd. (supra) would not be applicable. - Such conduct of an assessee, in my prima facie view, would attract for penalty under Rule 25 (1) (d) - stay granted partly.

Issues Involved:
1. Payment of duty through Cenvat credit.
2. Liability to pay interest on delayed duty payment.
3. Imposition of penalty under Central Excise Rules.
4. Allegations of fraudulent activity and misrepresentation.

Issue-wise Detailed Analysis:

1. Payment of Duty through Cenvat Credit:
The appellant deposited Rs. 16.70 lakhs through Cenvat credit out of a total confirmed demand of Rs. 88,80,952/-. The revenue objected, stating that the amount should have been deposited in cash. The Tribunal referenced decisions in *Solar Chemferts Pvt. Ltd.* and *Baba Vishkarma Engg. Co (P) Ltd.*, which held that deposits through Cenvat credit during default only result in interest confirmation to the Revenue. Thus, the Tribunal accepted the deposit through Cenvat credit as valid towards duty payment.

However, a dissenting opinion highlighted that the issue was not merely a default in duty payment but involved fraudulent actions. The dissenting member emphasized that Rule 8(3A) of the Central Excise Rules, 2002 mandates payment of duty in cash during the default period, prohibiting the use of Cenvat credit. This view was supported by judgments from the Gujarat High Court in *Harash Silk Industries* and the Madras High Court in *Unirols Airtex*.

2. Liability to Pay Interest on Delayed Duty Payment:
The Tribunal held that the appellant was liable to pay interest on the delayed payment of duty as per Rule 8(A) of the Central Excise Rules, 2002. The interest amount was not quantified in the impugned orders, and the Revenue was directed to quantify it. The appellant was instructed to deposit the quantified interest amount within eight weeks from the date of communication.

3. Imposition of Penalty under Central Excise Rules:
The Tribunal acknowledged that violation of Rule 8 attracts penal provisions under Rule 27 of the Central Excise Rules, 2002. The appellant was directed to deposit Rs. 5000/- towards the penalty, subject to which the recovery of the imposed penalty would be stayed.

The dissenting member, however, argued that the case involved fraudulent actions, warranting a penalty under Rule 25 read with Section 11AC of the Central Excise Act. Given the fraudulent conduct, a pre-deposit of Rs. 25 lakhs was deemed necessary for the grant of stay on the penalty.

4. Allegations of Fraudulent Activity and Misrepresentation:
The Tribunal found that the appellant had defaulted in duty payment from March 2008 to December 2008. The appellant issued cheques without sufficient funds and presented bogus counterfoils, misleading the Department. The fraudulent actions included submitting cheques that were either returned due to insufficient funds or never presented to the bank.

The dissenting member highlighted the fraudulent nature of the appellant's actions, which involved presenting cheques without sufficient funds and not reporting dishonored cheques to the Department. This conduct was deemed to attract penalties under Rule 25(1)(d) and Section 11AC.

Final Decision:
Due to the difference in opinions, the matter was referred to a third member. The third member concurred with the dissenting opinion, directing the appellant to pay the duty amount of Rs. 16.70 lakhs through cash and deposit Rs. 25 lakhs towards the penalty. The appellant was given eight weeks to comply, and the matter was scheduled for compliance verification.

Conclusion:
The Tribunal's majority decision required the appellant to deposit Rs. 25 lakhs towards the penalty and pay the duty amount of Rs. 16.70 lakhs in cash. The case highlighted the importance of adhering to Rule 8(3A) of the Central Excise Rules, prohibiting the use of Cenvat credit during default periods and emphasizing the consequences of fraudulent actions.

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