Mandatory duty-payment default rule applies to short payment too, while detention of goods was not justified on the facts.

Rule 8(3A) of the Central Excise Rules, 2002 is treated as mandatory where monthly duty is not paid in full by the due date, and the default consequence applies even in cases of short payment rather than only total non-payment. The provision requires consignment-wise payment without Cenvat credit until the outstanding duty with interest is cleared, and a narrow reading limited to complete default was rejected as inconsistent with the text. On detention of goods, continued retention was found unsustainable on the facts because there was no consistent default history or other basis justifying it, so detention was vacated while demand and penalty were upheld.

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Issues: (i) Whether Rule 8(3A) of the Central Excise Rules, 2002 was attracted where duty was not paid in full by the due date and the assessee had made only short payment for the relevant period; (ii) whether detention of the goods could be sustained in the facts of the case.

Issue (i): Whether Rule 8(3A) of the Central Excise Rules, 2002 was attracted where duty was not paid in full by the due date and the assessee had made only short payment for the relevant period.

Analysis: Rule 8(1) prescribes the manner and time for payment of monthly duty, and the explanation makes discharge of liability contingent upon credit of the amount to the account of the Central Government by the specified date. Rule 8(3A) provides the consequence of default beyond thirty days from the due date and requires payment on consignment-wise basis without utilisation of Cenvat credit until the outstanding amount with interest is paid. The expression default was held to cover any omission or failure to comply with the prescribed payment obligation, whether the case is one of short payment or complete non-payment. A construction limiting the rule only to total default for the whole month would defeat the plain language of the provision and render the explanation ineffective. The earlier view relied upon by the assessee was distinguished on facts and was not treated as laying down a contrary rule of law.

Conclusion: Rule 8(3A) was rightly invoked and the assessee's challenge on this issue failed.

Issue (ii): Whether detention of the goods could be sustained in the facts of the case.

Analysis: Although the department was entitled to proceed on the demand and penalty aspects, the record did not show a consistent history of default or any circumstance justifying continued detention of the goods without affording breathing time for compliance.

Conclusion: The detention of goods was unsustainable and was vacated.

Final Conclusion: The substantive demand and penal action were upheld, but relief was granted against detention of goods, resulting in only partial success for the assessee.

Ratio Decidendi: Where a fiscal rule prescribes the manner and time of payment of duty and also specifies a consequence for non-compliance, the provision is mandatory and any failure to discharge the duty obligation within time attracts the statutory consequence, even if the failure is characterised as short payment rather than total non-payment.

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