Cenvat credit payment during forfeiture period was permissible before Rule 8(3A), while delayed duty still attracted interest.

Prior to insertion of Rule 8(3A), duty could validly be discharged from Modvat/Cenvat credit even during forfeiture of the fortnightly payment facility, so the demand based on prohibition of credit utilisation was unsustainable. Delayed deposit of duty nevertheless attracted interest because the Revenue was deprived of timely payment, even though the duty had been assessed. Penalty on the company was maintained at the reduced level, but personal penalties on the Managing Director and Excise clerk were set aside for lack of material showing culpability or intent to evade duty.

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Issues: (i) Whether duty could be discharged from the Modvat/Cenvat credit account during the period when the facility of fortnightly payment stood forfeited; (ii) whether interest was payable on delayed deposit of duty; (iii) whether penalties on the company and its officers were sustainable.

Issue (i): Whether duty could be discharged from the Modvat/Cenvat credit account during the period when the facility of fortnightly payment stood forfeited.

Analysis: The issue had already been settled by the Larger Bench holding that, prior to insertion of sub-rule (3A) in Rule 8, an assessee could discharge duty liability from Cenvat credit even during the forfeiture period of the fortnightly payment facility, and such payment would not attract interest or penalty on that count.

Conclusion: The demand of duty raised on the premise that payment could not be made from the Modvat/Cenvat credit account was unsustainable and was set aside.

Issue (ii): Whether interest was payable on delayed deposit of duty.

Analysis: The duty admittedly was not deposited on the stipulated dates. The delay caused loss to the Revenue, and the liability to compensate that loss by way of interest followed notwithstanding the plea that the duty had already been assessed.

Conclusion: Interest on the delayed payment of duty was held payable.

Issue (iii): Whether penalties on the company and its officers were sustainable.

Analysis: The penalty on the company had already been reduced by the appellate authority and was found reasonable. In the facts of the case, no separate penalty was justified on the Managing Director, and the Excise clerk could not be fastened with penalty in the absence of material showing intent to evade duty or maintenance of wrong records.

Conclusion: The penalty on the company was maintained at the reduced amount, while the penalties on the Managing Director and the Excise clerk were set aside.

Final Conclusion: The assessee succeeded on the duty demand and the personal penalties, but remained liable to interest on the delayed duty payment, resulting in a partial allowance of the appeals.

Ratio Decidendi: Prior to insertion of Rule 8(3A), duty could be paid from Cenvat credit during forfeiture of the fortnightly payment facility, while delayed statutory payment of duty attracted interest and penalties required a factual basis showing culpability.

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