Use of valid Cenvat/Modvat credit for duty payment remained permissible during suspension of instalment facility

Before insertion of the non-obstante clause in Rule 8(3A) of the Central Excise Rules, 2002, suspension of the instalment payment facility under the earlier Central Excise Rules, 1944 did not bar an assessee from discharging duty by valid debit of accumulated Cenvat/Modvat credit. Where there was no allegation of wrongful availment or irregular utilisation of credit, duty could be paid either through PLA or by credit debit, and a demand insisting on cash payment alone was not sustainable. The stated legal position was applied in line with the jurisdictional High Court and Larger Bench ruling, leading to relief from the disputed demand.

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Issues: Whether, during the period when the facility for payment of duty in instalments was withdrawn under the erstwhile Central Excise Rules, 1944, the assessee could validly discharge duty by debiting Cenvat/Modvat credit instead of paying only in cash through PLA.

Analysis: The Tribunal applied the legal position that, prior to the insertion of the non-obstante clause in Rule 8(3A) of the Central Excise Rules, 2002, the corresponding pre-existing scheme under Rule 173G(1)(e) of the Central Excise Rules, 1944 did not exclude utilisation of accumulated Cenvat/Modvat credit during the period of suspension of the instalment facility. It accepted the binding effect of the jurisdictional High Court decision following the Larger Bench ruling that, in the absence of any allegation of wrongful availment or irregular utilisation of credit, duty could be discharged either from PLA or by debit of valid credit, and the contrary demand for cash payment could not be sustained.

Conclusion: The assessee was entitled to use Cenvat/Modvat credit for payment of duty during the relevant suspension period, and the demand treating such payment as invalid could not survive.

Final Conclusion: The appeal succeeded, and the assessee obtained the consequential relief flowing from the setting aside of the demand.

Ratio Decidendi: Before the insertion of Rule 8(3A), suspension of the instalment facility did not bar utilisation of valid Cenvat/Modvat credit for discharge of duty liability.

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