Rule 8 penalty for duty payment through Cenvat credit during PLA forfeiture upheld, but reduced in quantum.

Clearing goods during a period when fortnightly duty payment through PLA had been forfeited, and debiting Cenvat credit instead, attracted the consequence under Rule 8 of the Central Excise Rules, 2001. Such clearances were treated as clearances without payment of duty, so penal consequences were justified. However, the assessee's later payment of duty through PLA was taken into account in assessing penalty. The penalty was therefore upheld in principle but reduced from Rs. 2,00,000 to Rs. 20,000.

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Issues: Whether penalty imposed for clearing goods during forfeiture of fortnightly payment facility by debiting Cenvat credit instead of PLA was justified, and whether the quantum of penalty required reduction.

Analysis: Clearance of goods during the period when the assessee was required to pay duty through PLA, but instead paid through the Cenvat account, attracted the consequence contemplated by Rule 8 of the Central Excise Rules, 2001. Such clearances were to be treated as clearances without payment of duty, and penal consequences could validly follow. At the same time, the assessee had subsequently made good the duty payment in PLA, which was taken into account while considering the extent of penalty.

Conclusion: The penalty was warranted, but its amount was reduced from Rs. 2,00,000 to Rs. 20,000.

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