2022 (5) TMI 905 - AT - Central Excise

Failure to pay Central Excise duty while availing the benefit of CENVAT Credit - molasses - Rule 4(2) of Central Excise Rules read with Rule 8(1) of the Rules - period October 2012, December 2012 and February 2013 - levy of interest and penalty - HELD THAT - Undisputed fact is that appellant had received molasses from three khandsari units and in terms of Rule 4 (2) read with Rule 5 of the Central Excise Rules, 2002 was required to pay the Central Excise Duty due on the said goods treating them as if the said goods have been manufactured by them. Rule 4 (2) and Rule 5, creates the liability to pay the Central Excise Duty on the recipient of the goods by treating them as deemed manufacturer of the impugned goods. These rules do not provide for the manner of payment of the duty in respect of these goods. To reject the contention in respect of the utilization of the available CENVAT Credit for payment of the duty on the molasses procured by the Appellant from the Khandsari unit, Commissioner (Appeals) has referred to Rule 2 (nna) of the CENVAT Credit Rules. In his view this rule provides for the case where the facility of payment has been extended by declaring certain process as the process of deemed manufacture for the purpose of utilization of the CENVAT Credit - From the Rule 4 (1A) and Rule 12AA (1), reproduced it is quite evident that these rules in respect of the duty payment on the job work done in respect of the specified goods. These rules do not create the liability to pay the central excise duty on the goods got processed from the job worker. These rules provide the option to pay the duty either to the job worker or to the person who gets the goods job worked. There is no aspect of the deemed manufacture described as per the said rules and the liability to pay the duty by the person getting the goods processed by the job worker is purely optional. The fact that appellant had taken the CENVAT Credit without payment of any duty has not been challenged by the appellant. Without any challenge to the said finding that appellant had availed the CENVAT Credit in respect of 3521.565 M.T. of molasses procured from Khandsari Sugar Factories in June and July 2012, without payment of any duty on the same, the entire arguments advanced by the appellant get negated. They are required to pay duty before availing the CENVAT Credit. Subsequent reversal of such credit availed without payment of any duty cannot be termed as payment of duty. The fraudulent intentions of the appellant to avail credit without payment of duty cannot be justified on the basis of the legal, submissions made by the appellant - It is settled by the decisions of this tribunal and courts that interest liability is associated with the delay in payment of duty. Appeal dismissed.

Summary

Issues Involved:
1. Confirmation of demand of Central Excise duty.
2. Confirmation of demand of interest on the confirmed duty.
3. Imposition of Redemption Fine.
4. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Confirmation of demand of Central Excise duty:
The appellant, holding Central Excise Registration for manufacturing Special Denatured Spirit and Rectified Spirit, procured molasses from three Khandsari Sugar manufacturing units in June and July 2012. As per Rule 4(2) of the Central Excise Rules, 2002, the appellant was required to pay the duty on the molasses as if they had manufactured it. The appellant failed to pay the duty on time and only paid it in October 2012, December 2012, and February 2013. A Show Cause Notice was issued, and the Additional Commissioner confirmed the demand of Rs. 27,20,409/- under Section 11A(10) of the Central Excise Act, 1944. The Commissioner (Appeals) upheld this demand, stating that the appellant had not paid the duty either through their CENVAT account or in cash, and the utilization of CENVAT Credit for payment of duty on molasses procured from Khandsari Sugar Factory was not proper. The Tribunal agreed with the Commissioner (Appeals) that the appellant had taken CENVAT Credit without payment of any duty and that subsequent reversal of such credit could not be termed as payment of duty.

2. Confirmation of demand of interest on the confirmed duty:
The Commissioner (Appeals) held that interest under Section 11AA of the Act was recoverable from the appellant, as interest is compensatory in nature for the government exchequer. The Tribunal agreed with this observation, stating that interest liability is associated with the delay in payment of duty, and upheld the confirmation of interest on the duty not paid.

3. Imposition of Redemption Fine:
The Commissioner (Appeals) set aside the imposition of Redemption Fine of Rs. 6,00,000/- imposed by the Additional Commissioner. The Tribunal did not specifically address this issue in the detailed analysis, implying acceptance of the Commissioner (Appeals)'s decision to set aside the fine.

4. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002:
The Commissioner (Appeals) imposed a penalty of Rs. 27,20,409/- under Rule 25 of the Central Excise Rules, 2002, stating that the appellant had contravened the provisions of Rule 4(2) and Rule 8 of the Rules and had attempted to cover it up by fraudulently taking CENVAT Credit without payment of duty. The Tribunal agreed with the Commissioner (Appeals), citing the decisions of the Hon’ble Apex Court in Dharmendra Textile Processors and Rajasthan Spinning and Weaving Mills, and upheld the imposition of the penalty.

Conclusion:
The Tribunal modified the impugned order to the extent discussed in para 5.3, where it disagreed with the Commissioner (Appeals) on the interpretation of Rule 4(2) and the utilization of CENVAT Credit. However, it upheld the confirmation of duty, interest, and penalty, and dismissed the appeal. The order was pronounced in the open court on 18.05.2022.