Cheque-based duty payment and delayed encashment can breach prescribed payment mode, justifying penalty reduction rather than relief

Discharge of excise duty by cheque was held to contravene Rule 9(1) where PLA credit was taken on the date of issue but the cheques were encashed only after a delay. The availability of sufficient funds and eventual honouring of the cheques was not treated as a complete answer, because it did not comply with the prescribed manner of payment. The precedent relied on by the appellants on cheque payment did not assist on the penalty question, as the present penalty arose from non-compliance with the statutory mode of payment. The penalty was therefore maintained but reduced.

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Issues: Whether penalty imposed for discharge of duty liability through cheques, which were encashed after a delay, was sustainable and whether it deserved reduction.

Analysis: The appellants had taken credit in PLA on the date of issue of cheques, while the cheques were cleared only after 15 to 18 days. The Tribunal held that this constituted contravention of Rule 9(1) of the Central Excise Rules. The plea that sufficient balance was available and that the cheques were honoured was not accepted as a complete answer, because the availability of funds did not justify discharge of duty through cheques and immediate PLA credit. The Tribunal noted that the cited precedent on cheque payment satisfying duty payment requirements did not assist the appellants on the penalty issue, since the present penalty was imposed for non-compliance with the manner of payment prescribed by law.

Conclusion: The penalty was not set aside, but it was reduced to Rs. 10,000.

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