9911796707
TMI Blog2014 (9) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Rs. 2,25,000/- in terms of provisions of Rule 25, Rule 26 and Rule 27. 2. For the purpose of interim stay, we find that the Tribunal has considered the said issue in number of decisions and has held that in case of default in payment of duty in terms of Rule 8, subsequent utilization of Cenvat credit for clearance of goods would result only in confirmation of demand of interest, inasmuch as there would be no revenue loss. Reference in this regard can be made to the Tribunal's decision in the case of Solar Chemferts Pvt. Ltd. v. Commissioner [2012 (276) E.L.T. 273 (Tri.-Mum.)] as also to a latest decision of Ahmedabad Bench in the case of F.S. Engineers v. CCE, Ahmedabad [2013 (293) E.L.T. 61 (Tri.-Ahmd.)]. It stands held by the Tribunal that in case of utilization of credit instead of payment of duty in cash it results in loss to the Revenue only to the extent of interest. To the same effect is the decision of Tribunal in the case of Manipal Springs Ltd. v. Commissioner [2012 (286) E.L.T. 628 (Tribunal)]. As regards penalty, we find that the issue is no more res integra and stands decided by the Gujarat High Court in the case of CCE v. Saurashtra Cement Ltd. reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in Solar Chemferts Pvt. Ltd. v. CCE, Thane - 2012 (276) E.L.T. 273 (Tri.-Mumbai) and CESTAT, Ahmedabad Bench decision in F.S. Engineers v. CCE, Ahmedabad - 2013 (293) E.L.T. 61 (Tri.-Ahmd.) wherein it has been held that utilization of Cenvat credit instead of payment of duty in cash, results in loss to the Revenue only to the extent of interest. I do not agree and record separate order. Utilization of Cenvat Credit instead of PLA (a) To appreciate payment of duty consignment-wise through utilization of Cenvat credit in respect of clearance after default in payment of duty, it is proper to refer Rule 8 and specifically Rule 8(3A) of Cenvat Credit Rules, 2002. Rule 8(3A) provides a legal fiction according to which failure to pay duty consignment-wise through PLA shall be deemed that goods have been cleared without payment of duty and penal consequences shall follow. For ready reference, provisions of Rule 8 are reproduced. Rule 8 of the Central Excise Rules, 2002 (hereinafter referred to as the rules provided that :- "(1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by 5th day of the following month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under sub-rule (3) in the same manner as they are applicable for recovery of any duty or other sums payable to the Central Government." To understand the whole issue, it is necessary to refer to brief facts. 7. The noticee has not paid the duty on the goods removed from their factory premises for the period from April-2010 to November-10, as per the returns filed by them, I find that as per the provisions of the Rule 8 of the Central Excise Rules, 2002 the duty on the goods removed from the factory during a month shall be paid by 5th day of the following month. As stated in the notice, the noticee was required to pay the duty by 5th day of May-2010 in respect of the goods removed during the month of April-2010, 5th day of June-2010 in respect of the goods removed during the month of May-2010, 5th day of July-2010 in respect of the goods removed during the month of June-2010, 5th day of August-2010 in respect of the goods removed during the month of July-2010, 5th day of September-2010 in respect of the goods removed during the month of August-2010, 5th day of October-2010 in respect of goods removed during the month of September-2010, 5th day of November-2010 in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s removed from a factory or warehouse. Hence, instead of paying excise duty on each removal, by virtue of the provisions of sub-rule (1) of Rule 8, in respect of goods cleared during the first fortnight duty is required to be paid by the 20th of the said month and in respect of the goods cleared during the second fortnight by the 5th of the following month. Sub-rule (3) of Rule 8 provides for payment of interest in case of late payment of duty. Sub-rule (4) which is relevant for the present purpose provides for the consequences of non-payment of duty within the period prescribed and lays down that in case of default by the assessee in payment of any one instalment beyond a period of thirty days from the due date, or in payment of instalment for the third time in a financial year, the assessee shall forfeit the facility of payment of dues in instalments for a period of two months from the date of communication of the order passed by the Deputy Collector of Central Excise in this regard or till such date on which all dues are paid, whichever is later. The sub-rule further provides that during such period the assessee shall be required to pay excise duty for each consignment by debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have utilized Cenvat credit till the outstanding amount including the interest thereon had been paid. The assessee, however, instead of making payment from the PLA (account current), had made payment from the deemed credit in breach of the directions issued by the Deputy Commissioner in the order withdrawing the facility and thereby clearly contravened the provisions of sub-rule (4) of Rule 8 of the Rules. Legal provisions as contained in Rule 8(3A) are very clear "(3A) - If the assessee fails to pay the amount of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excised duty for each consignment at the time of removal, without utilizing the CENVAT Credit till the date of assessee pays the outstanding amount of including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow." 10. It is clearly stipulated in Rule 8(3A) that in case of default, assessee shall pay e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of monthly duty liability continues beyond a period of 30 days from the due date, the assessee forfeits the facility to discharge duty liability on monthly basis and is required to pay duty on consignment basis at the time of clearance of each consignment from factory and he also forfeits the facility to utilize the Cenvat Credit for payment of duty and thus during the default period, he is required to discharge duty liability through PLA without utilizing the Cenvat Credit. The forfeiture period starts automatically once the default in discharge of monthly duty liability continues beyond the period of 30 days from the due date. In this case, the appellant defaulted in payment of duty and the default continued beyond the period of 30 days. There was delay of 47 days, 147 days, 121 days, 90 days and 60 days beyond the due date in discharge of duty liability for May'10, June'10, July'10, Aug.'10 and Sept.'10 respectively. There was delay in discharge of duty liability for April'10, Oct.'10 and Nov.'10 also but the same was for period less than 30 days from the due date. The allegation against the appellant is that during the forfeiture period also, they paid duty by utilizing Cenv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of Section 35F, the appellant shall pay the duty of Rs. 13,39,225/- through PLA along with interest and subject to fulfilment of these conditions only, the requirement of pre-deposit of the balance amount of penalty shall stand waived and its recovery stayed. Accordingly the following point of different has been referred to the undersigned for decision. "Whether it is correct in case of default to make payment from Current Account and direct pre-deposit of duty through current account, as held by Member (Tech.); or Decision of Member (Judicial) justifying the reversal from Cenvat Credit Account towards pre-deposit in relation to default is to be accepted." 16. Heard both the sides. 17. Sh. V.R. Sethi, Advocate, learned counsel for the appellant, pleaded that there was delay in discharge of monthly duty liability for more than 30 days beyond the due date only for the months of May'10, June'10, July'10, Aug.'10 and Sept.'10, that the total duty payable for these months is Rs. 5,40,468/-, that there was delay of more than 30 days beyond the due date in payment of this duty only, that the duty for April'10, Oct.'10 & Nov'10 had been paid within 30 days from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in these Rules shall follow, that in view of the provisions of Rule 8(3A), during the forfeiture period, the appellant was required to pay duty through PLA without utilizing the Cenvat Credit, that Hon'ble Gujarat High Court in case of Commissioner of Central Excise v. Harish Silk Industries reported in 2013 (288) E.L.T. 74 (Guj.) has held that when the facility of making payment in instalments under sub-rule (1) of 8 of Central Excise Rules, 2002 came to be withdrawn for repeated default of the assessee in making timely payment of Central Excise duty and assessee was ordered to pay duty for each consignment by debit to the current account, the assessee was required to make payment of duty consignment-wise from the PLA only and could not have utilized Cenvat Credit till the outstanding amount including the interest thereon had been paid and that the same view has been taken by the Tribunal in case of F.S. Engineers v. CCE, Ahmadabad-II reported in 2013 (293) E.L.T. 61 (Tri.-Ahmd.). He, therefore, pleaded that in view of repeated default of the appellant, when default in discharge of monthly duty liability continued beyond the 30 days from the due date, the Hon'ble Member (Tech.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality in the payment on duty of Rs. 13,39,225/- through Cenvat Credit account on clearances made during forfeiture period and there is no requirement to pay the duty on the goods cleared during forfeiture period once again through PLA. In this regard she has relied upon the judgment of the Tribunal in the case of Solar Chemeferts Pvt. Ltd. (Supra). However Hon'ble Member (Tech.) is of the view that in addition to the condition of pre-deposit of Rs. 5,000/- towards penalty, the appellant should also pay duty of Rs. 13,39,225/- in respect of the goods cleared during the forfeiture period through current account i.e. through PLA, as during that period they were required to pay duty on any goods cleared on consignment basis without utilizing the Cenvat Credit. 20. The details on period of delay in discharge of monthly duty liability for the months of April'10, May'10, June'10, July'10, Aug.'10 Sept.'10, Oct.'10 & Nov.'10 are given in "Annexure-A" to the show cause notice. From this Annexure it is clear that the period of default exceeded 30 days from the due date only in respect of May'10, June'10, July'10, Aug.'10 & Sept.'10 and it is in respect of the default periods beyond 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat Credit Rules, 2004 in its entirety except for understanding the meaning of the term 'duty' or 'duty of excise'. In fact, the rigour of Section 8(3A) operates notwithstanding anything contained in sub-rules (1) and (4) of Rule 3 of Cenvat Credit Rules. Sub-rule 4(b) of Cenvat Credit Rules permits utilization of Cenvat Credit for payment of duty of excise on any final product. This provision makes the position very clear that Cenvat Credit cannot be used as a matter of right for payment of duty of excise, in case the assessee defaults in payment of duty before the cut off period under Rule 8(3A) of Central Excise Rules, 2002. 14. The purpose of explanation that the expression 'duty' or 'duty of excise' shall also include the amount payable in terms of the Cenvat Credit Rules, 2004, would not amount to a permission of utilizing the Cenvat Credit for paying the excise duty. Rule 8(3A) is very specific when it provided that the entire duty should be paid without utilizing the Cenvat Credit. There is no question of utilizing the explanation for the purpose of using the Cenvat Credit for paying the outstanding duty amount. 15. The law is, therefore, clear that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility was within 30 days from the due date. In view of this, I direct the appellant to pay an amount of Rs. 6 Lakh through PLA in addition to payment of Rs. 5,000/- towards the penalty for compliance with the provision of Section 35F. No interest on the amount of Rs. 6 lakh is payable. Once the amount of duty of Rs. 6 Lakh is paid through PLA, the appellant would be eligible for re-credit of the equivalent amount in the Cenvat Credit which had earlier been debited by them. The point of difference stands answered as above. Sd/- (Rakesh Kumar) Member (Technical) 23. In view of the majority order, the appellant is directed to deposit an amount of Rs. 6,00,000/- (Rupees six lakh only) within a period of 8 weeks for the purpose of Section 35F. After the deposit of Rs. Six lakh to be made through PLA or in cash, they would be entitled for recredit of the equivalent amount in their Cenvat credit account. 24. Matter to come up for ascertaining compliance on 26-5-2014. (Pronounced in the Court on 14-3-2014) Sd/- (Manmohan Singh) Member (Technical) Sd/- (Archana Wadhwa) Member (Judicial) 25. May be taken up in pronouncement in the Court. (Pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
