2016 (11) TMI 227 - AT - Central Excise

Violation of provisions of Rule 8(3A) - default in duty payment of more than 30 days - all the subsequent clearances were to be made on cash payment only without utilizing cenvat credit - whether the Revenue s claim that clearances subsequent to March, 2006 made by utilizing cenvat credit shall be deemed to have been cleared without payment of duty in terms of the said rules justified? - Held that - the appellants have fully discharged the default amount, by 16.06.2006 in cash, with applicable interest for the delayed payment. In such situation to hold that the clearances subsequent to March, 2006 as non-duty paid clearance only on the ground that the cenvat credit has been used for payment of such liability, is not legally sustainable - The ratio of the Hon ble Supreme Court s decision in the case of Jayaswal Neco Ltd. 2015 (8) TMI 404 - SUPREME COURT referred where interpreting the terms paid excise duty for each consignment by debit to Account Current held that it could not be said to be the only mode of payment of duty during this period. Payment through cenvat credit is also a valid mode of payment - there is no violation of provisions of Rule 8(3A) - appeal allowed - decided in favor of appellant.

Summary

Issues: Violation of Rule 8(3A) of Central Excise Rules, 2002

Analysis:
The appeal challenged an order from the Commissioner of Central Excise regarding the appellant's failure to pay duty on time for the manufacture of heat exchangers and parts, leading to the incorrect utilization of cenvat credit. The appellant argued that Rule 8(3A) required an order from the Asstt. Commissioner to forfeit the monthly payment facility, which was not issued in this case. The rule was later substituted, but the appellant contended that there was no restriction on cenvat credit utilization at the relevant time. The legal provisions up to 1.6.2006 mandated an order for forfeiting the monthly payment facility, and without such an order, the appellant was not required to pay duty for each consignment by debit to the current account. Citing the Supreme Court's interpretation in a previous case, it was noted that payment through cenvat credit was a valid mode of payment, and the rule requiring payment without utilizing cenvat credit during a default period was held unconstitutional by various High Courts. The Tribunal referred to multiple decisions supporting this stance and highlighted that the matter was pending before the Supreme Court. Despite the interim stay granted by the Supreme Court, the Tribunal found that the appellant had fully paid the default amount by the due date, making it legally unsustainable to deem subsequent clearances as non-duty paid solely based on cenvat credit utilization.

The Tribunal concluded that the impugned order could not be legally sustained as the appellant had fulfilled the payment obligation within the required timeframe. Therefore, the appeal was allowed, and the order was set aside. The decision was pronounced on 21.10.2016.