2016 (2) TMI 820 - AT - Central Excise

Non payment of duty - Interest payment made from Cenvat credit account - Held that - It is not under dispute that the appellants cleared the goods from February, 2006 to March, 2008 without payment of duty. They did not file any quarterly/monthly returns. The only explanation given by them is that they have financial difficulties. It is not in dispute that the said amount of duties were collected from their customers. It was their duty to deposit clearance of the goods on the due date. Under these circumstances, we do not find any merit in the appeal either for duty, interest or penalty. Cenvat Credit can be used only for the purpose specified in the Cenvat Credit Rules. Interest payment cannot be made from Cenvat credit account. As far as the penalty on the Director is concerned, we find from the records that he was also concerned with the Central Excise as also other financial matters. The fact that they had collected duty but not deposited the duty is not disproved. He cannot absolve himself from the penalty. However, keeping in view the overall facts and circumstances of the case, we reduce the penalty on the Director Shri Atul Ashok Purandare from ₹ 10 lakhs to ₹ 2 lakhs, except the above modification, both the appeals are dismissed.

Summary

Issues Involved:
Non-payment of duty, continuous clearance of goods without payment, financial difficulties as a defense, applicability of Cenvat credit for interest payment, penalty imposition on the Director.

Analysis:
1. Non-Payment of Duty:
The appellant, engaged in manufacturing control panels, failed to pay duty amounting to &8377; 7,84,666/- in February 2006, despite having a Cenvat credit balance of &8377; 4,20,129/-. Subsequently, they continued to clear goods without paying duty from April 2006 to March 2008, collecting duty from customers but not depositing it. This non-payment led to an investigation and issuance of a notice, culminating in the appeal.

2. Financial Difficulties Defense:
The appellant cited financial difficulties as the reason for non-payment of duty and closure of their unit from 2008 onwards. They struggled to arrange the pre-deposit ordered by the Tribunal. However, the Tribunal found this explanation insufficient, emphasizing that duty collection from customers should have been deposited promptly, regardless of financial challenges.

3. Applicability of Cenvat Credit for Interest Payment:
The appellant sought to utilize accumulated duty credit for interest payment, but the Tribunal clarified that Cenvat Credit can only be used for specified purposes under the Cenvat Credit Rules. Interest payment cannot be facilitated from the Cenvat credit account, reinforcing the regulatory limitations.

4. Penalty Imposition on the Director:
Regarding penalty imposition on the Director, the Tribunal noted his involvement in Central Excise and financial matters, rejecting the attempt to absolve himself from penalty due to lack of knowledge about excise rules. Despite reducing the penalty from &8377; 10 lakhs to &8377; 2 lakhs for the Director, the Tribunal upheld penalty imposition, emphasizing the obligation to deposit duty collected from customers.

In conclusion, the Tribunal dismissed the appeals, finding no merit in the arguments presented by the appellant. The continuous clearance of goods without duty payment over an extended period, coupled with duty collection from customers, highlighted the appellant's non-compliance with regulatory obligations. The judgment underscored the importance of timely duty payment and upheld penalties while recognizing the Director's reduced penalty due to overall circumstances.