Forfeiture period duty payment had to use account current, while penalty need not equal the full duty demand.

During the forfeiture period under Rule 173G(1)(e), duty had to be paid only by debit to the account current or PLA, and utilisation of Cenvat credit was not permitted; non-compliance exposed the goods to treatment as cleared without payment of duty, with duty and interest payable. The conduct also attracted penalty under the Central Excise Rules, but the penalty quantum was not required to equal the full duty demand in every case. Because the transactions were properly recorded, a reduced penalty was considered sufficient, with the duty and interest demand sustained and the penalty substantially curtailed.

---

---

Issues: (i) Whether, during the period of forfeiture of the instalment facility under Rule 173G(1)(e), duty was required to be paid only by debit to the account current or PLA and not by utilisation of Cenvat credit. (ii) Whether penalty equivalent to the duty demand was mandatory in the facts of the case.

Issue (i): Whether, during the period of forfeiture of the instalment facility under Rule 173G(1)(e), duty was required to be paid only by debit to the account current or PLA and not by utilisation of Cenvat credit.

Analysis: Rule 173G(1)(e) required a defaulting manufacturer, for the forfeiture period, to pay excise duty for each consignment by debit to the account current. The provision was read as restricting the mode of payment during that period, and the earlier interpretation confirmed that utilisation of Cenvat credit was not permitted for such payment while the forfeiture operated. A default in compliance attracted the consequence that the goods would be treated as cleared without payment of duty, with the attendant liability to duty and interest.

Conclusion: The duty was required to be paid through PLA or account current during the forfeiture period, and the demand of duty and interest was upheld.

Issue (ii): Whether penalty equivalent to the duty demand was mandatory in the facts of the case.

Analysis: The conduct of the manufacturer attracted penalty under Rule 173Q(1) of the Central Excise Rules, 1944 and Rule 25(1) of the Central Excise Rules, 2001 because the default was treated as deemed clearance without payment of duty. However, the provision did not require that penalty must always equal the full duty demand. As the transactions were properly recorded, a lesser penalty was considered sufficient to meet the ends of justice.

Conclusion: Penalty was sustainable, but the equivalent penalty was reduced to Rs. 1,00,000.

Final Conclusion: The demand of duty and interest was sustained, while the penalty was substantially reduced, resulting in partial relief to the appellant.

Ratio Decidendi: During the statutory forfeiture period, duty had to be discharged only through the prescribed account current mode, and although breach of that requirement justified penalty, the quantum of penalty was not rigidly required to match the duty demand.

---