2012 (6) TMI 275 - AT - Central Excise

Appeal partially allowed, penalty reduced to Rs.5,000. Tribunal directs interest calculation and communication on short payments.

M/s MEENAKSHI ASSOCIATES Versus COMMISSIONER OF CENTRAL EXCISE, NOIDA

The appeal was partially allowed, setting aside the duty demanded and reducing the penalty to Rs.5,000. The Tribunal directed proper calculation and ... Demand of duty, interest and penalty - default in payment of duty remained continue beyond 30 days - party has paid an amount through PLA and through cenvat credit account as Central Excise duty - contravention to the provisions of Rule 8(3A) – Held that:- Actually Rule 8 (3A) says that the goods will be deemed to be cleared without payment of duty and all the consequences under 'these Rules' will follow. The reference is only to the C. E. rules and not to the Cenvat Credit Rules, 2004. The deeming fiction will apply only for applying penal consequences under Central Excise Rules 2002. The major consequence is that such goods would have been liable to seizure and confiscation under Rule 25 of C. E. Rules. In fact Rule 8(3A) is drafted to enable this as a means to compel the assesse to pay his declared dues promptly by the due date or at least within thirty days thereafter. Non-payment of excise duty arises often in administration of excise levy. Show Cause Notices are issued in such cases as per provisions of Section 11A of the Central Excise Act to recover duty short paid. Normally such short-payment can be made good by paying duty through Cenvat credit as authorized by Central Excise Rules, 2002 and Cenvat Credit Rules, 2004. So there should be a reason why such payment cannot be accepted in this case. The reason being quoted is that this is a situation covered by Rule 8(3A) and the Rule prescribes that so long as the assessee is in default for any previous month payment through Cenvat credit is not a proper discharge of duty liability. This prohibition gets lifted the moment the default is made good along with appropriate interest on defaulted amount and normal situation is restored. Imposition of penalty under Rule 25 - In view of the decision of Gujarat High Court in the case of CCE Vs. Saurashtra Cement Ltd (2010 (9) TMI 422 (HC) ) penalty under Rule 27 is the appropriate penalty and reduce the penalty on the Appellants to Rs.5,000/-. Appeal is thus partially allowed by setting aside the duty demanded and reducing the penalty to Rs.5,000/-. Issues Involved:1. Admissibility of additional documents.2. Compliance with Rule 8 of Central Excise Rules, 2002.3. Default in payment of excise duty and interest.4. Validity of demand raised under Section 11A and Rule 8(3A).5. Applicability of penalties under Rule 25 and Section 11AC.6. Calculation and payment of interest on defaulted amounts.7. Quantum of penalty under Rule 27.Issue-wise Detailed Analysis:1. Admissibility of Additional Documents:The appellants filed two Miscellaneous applications (E/Misc No.222/2010 and E/Misc No.700/2011) to adduce additional documents. These documents pertained to the passing of Final Order No. 385-388/08 dated 26.6.08 and Order-in-Original No. 21/Commr/Noida/2011-11 dated 31-12-2010, which were relevant for deciding the matter. The Tribunal allowed these applications, finding the records pertinent for the case.2. Compliance with Rule 8 of Central Excise Rules, 2002:The appellants, manufacturers of excisable goods, were required to pay excise duty monthly by the 5th of the following month and file ER-1 returns. The dispute related to defaults in duty payment from June 2006 to March 2008. Rule 8(3A) stipulates that if an assessee defaults in payment beyond 30 days from the due date, they must pay excise duty for each consignment at the time of removal without utilizing CENVAT credit.3. Default in Payment of Excise Duty and Interest:The appellants defaulted in duty payments during June 2006 to March 2007 and April 2007 to March 2008. They paid part of the duty through PLA and the rest through CENVAT credit, which was in contravention of Rule 8(3A). The Show Cause Notices alleged non-payment of Rs.1,28,96,280/- and Rs.1,55,72,295/- for the respective periods and demanded interest and penalties.4. Validity of Demand Raised under Section 11A and Rule 8(3A):The Tribunal found that the demand raised by Revenue was maintainable only if the CENVAT credit taken during the defaulting period was denied. Rule 8(3A) restricts the utilization of credit but does not negate taking of credit. The Tribunal noted that the demand was disproportionately high and focused on the calculated silence regarding the credit of duty paid on raw materials.5. Applicability of Penalties under Rule 25 and Section 11AC:The Tribunal considered the appellants' argument that the short payment of interest was a bona fide mistake and should not be considered a default. The Tribunal found that the appellants had declared their duty liability and paid penalties by way of interest. It was concluded that the provisions of Section 11AC were not applicable as there was no intention to evade duty.6. Calculation and Payment of Interest on Defaulted Amounts:The Tribunal emphasized that interest on the defaulted duty amounts and on duty payable on clearances during the defaulting period was due. The Tribunal directed that interest should be calculated properly and paid if there was any shortfall. The Tribunal noted that the department had focused on fastening liabilities rather than proper interest calculation.7. Quantum of Penalty under Rule 27:The Tribunal held that penalty under Rule 27 was appropriate, reducing the penalty to Rs.5,000/-. The Tribunal referred to the decision of the Gujarat High Court in the case of CCE Vs. Saurashtra Cement Ltd-2010 (260) ELT 71 (Guj) to support this view.Conclusion:The appeal was partially allowed by setting aside the duty demanded and reducing the penalty to Rs.5,000/-. The Tribunal directed that any short payment of interest on defaulted amounts or unauthorized use of CENVAT credit should be properly calculated and communicated for payment.