CENVAT credit bar on duty default beyond the prescribed period upheld, with penalty sustained under central excise law.

Default in payment of central excise duty beyond the prescribed period triggered Rule 8(3A), requiring duty on each subsequent clearance to be paid at removal without using CENVAT credit until the outstanding duty and interest were discharged. The assessee's admitted non-payment on due dates meant the statutory bar on utilisation of CENVAT credit applied, and the clearances were treated as made without payment of duty by operation of the rule. On that basis, the penalty under Section 11AC of the Central Excise Act was sustained.

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Issues: Whether, on default in payment of duty beyond the prescribed period, the assessee was barred from utilising CENVAT credit for subsequent clearances and whether the penalty imposed under Section 11AC of the Central Excise Act was sustainable.

Analysis: The relevant rule provided that where the assessee defaulted in payment of duty beyond 30 days from the due date, duty for each consignment had to be paid at the time of removal without utilising CENVAT credit until the outstanding duty with interest was discharged, and failure attracted a deeming fiction of clearance without payment of duty. The admitted position was that duty was not paid on the due dates, yet the monthly returns reflected payment from PLA without corresponding balance. In these circumstances, the statutory restriction on utilising CENVAT credit applied and the impugned penalty could not be faulted.

Conclusion: The default attracted the bar under Rule 8(3A) of the Central Excise Rules, and the penalty under Section 11AC of the Central Excise Act was upheld.

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