2016 (12) TMI 713 - AT - Central Excise

Default in payment of duty - contravention of provisions of Sub-rule 3(A) of Rule 8 of Central Excise Rules, 2002 - the appellants cleared the goods using the Cenvat credit account during the period, which they defaulted payment of education cess and higher education cess as part of the duty - Held that - The fact remains that a quantum of ₹ 4,260/- was defaulted by the appellant during the relevant period. It needs to be mentioned that the said amount had been reflected in the ER 1 return by the appellant. Taking into consideration, that the amount defaulted is nominal and also the fact that it was only educating cess, and secondary education cess that is to be calculated on the duty that has already been discharged, I am convinced that there is no mens rea /intention on the part of the appellant to evade payment of duty - In view thereof, on the facts as well, following the decision of the case, I hold that the demand is unsustainable - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Allegation of contravention of Central Excise Rules regarding payment of education cess and higher education cess utilizing Cenvat credit account.

Analysis:
The case involved the appellants, manufacturers of goods under a specific chapter sub-heading, who were alleged to have contravened provisions of Sub-rule 3(A) of Rule 8 of the Central Excise Rules, 2002. The show cause notice accused them of clearing goods using the Cenvat credit account without paying education cess and higher education cess as part of the duty for a particular period. The original authority confirmed a substantial demand along with interest and imposed a penalty. In appeal, the duty demand was reduced by the Commissioner (Appeals) to a lesser amount, and the penalty was also reduced. The appellants challenged this decision before the Tribunal.

During the proceedings, the appellants' representative argued that there was an inadvertent omission to pay a nominal amount towards education cess and higher education cess during the disputed period. Upon being notified by the department, the appellants promptly discharged the liability along with interest. It was emphasized that there was no intention to evade duty payment, and the mistake was unintentional.

On the respondent's side, it was reiterated that the appellants, by defaulting on the payment of education cess and higher education cess, should not have utilized the Cenvat credit for duty payment during that period. The respondent maintained the findings of the impugned order.

After hearing both parties, the Member (Judicial) considered the nominal amount defaulted by the appellants and noted that it had been reflected in the relevant return. Given the circumstances, including the nature of the defaulted amount and the absence of mens rea to evade duty payment, the Member found in favor of the appellants. Referring to previous decisions challenging Rule 8(3)(A) before various High Courts, the Member held the demand to be unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.

In conclusion, the judgment highlighted the importance of considering the specific circumstances of default and the absence of intent to evade duty payment in cases involving alleged contraventions of Central Excise Rules related to cess payments and Cenvat credit utilization.