2013 (9) TMI 417 - AT - Central Excise

Appellant Liable for Interest on Central Excise Duty Default

FS. ENGINEERS Versus COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-II

The appellant defaulted in payment of central excise duty, leading to a requirement to discharge duty in cash and not through cenvat credit. The Tribunal ... Payment of central excise duty - as per the provisions of Rule 8(3A) of the Central Excise Rules, 2002 - After defaulting in payment of duty appellant also utilised an amount of Rs.94,638/- from cenvat credit when it was revised to be paid only through PLA as per the provisions of Rule 8(3A) of the Central Excise Rules - penalties under Rule 25, Rule 26 or Rule 27 – Held that:- As per CCE v. Saurashtra Cement Ltd. [2010 (9) TMI 422 - GUJARAT HIGH COURT], decided that penalty under Rule 27 only can be imposed - Not a case of wilful suppression with intention to evade duty – Correctly reliance placed on Manipal Springs Ltd. (supra). Therefore no penalty under Rule 25 of the Central Excise Rules and under Section 11AC of Central Excise Act, 1944 is attracted in the case. Decided in favor of Assessee. Issues involved:1. Default in payment of central excise duty under Rule 8(3A) of the Central Excise Rules, 2002.2. Utilization of cenvat credit during the default period.3. Liability to pay interest for default period.4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.Analysis:1. Default in Payment of Central Excise Duty:The appellant defaulted in payment of central excise duty of Rs.3,76,855/- for the period from April 2009 to March 2010 as per Rule 8(3A) of the Central Excise Rules, 2002. The duty was not paid leading to default, and the appellant was required to discharge the duty from the PLA consignment wise. The issue was whether payment made through cenvat credit during the default period instead of cash invites recovery of duty and penalties. Rule 8(3A) mandates duty payment in cash for defaults beyond 30 days from the due date, without utilizing cenvat credit until the outstanding amount is paid. The appellant's duty was paid from RG 23, causing a loss of revenue only in interest for the period from cenvat credit utilization until full cash payment. The appellant was held liable to pay interest for this period.2. Utilization of Cenvat Credit:The appellant utilized cenvat credit amounting to Rs.94,638/- during the default period when duty was required to be paid in cash. The Tribunal held that payment through cenvat credit during default does not discharge duty obligations. The duty paid through cenvat credit becomes proper only after the default amount is paid in cash, attracting interest until then. The Tribunal cited a previous case to support this view, emphasizing that interest and penalty are payable until proper discharge of duty is made.3. Liability to Pay Interest for Default Period:The Tribunal determined that the appellant is liable to pay interest at the applicable rate for the period from cenvat credit utilization until full cash payment of duty. The duty payment through cenvat credit during the default period did not absolve the appellant from the obligation to pay interest until the duty was fully discharged in cash.4. Imposition of Penalty under Section 11AC:Regarding the imposition of penalty under Section 11AC of the Central Excise Act, 1944, the Tribunal found that the appellant had discharged the entire differential duty liability as shown in the returns. There was a mechanism for reconciliation of duty payments through assessments, indicating no willful suppression to evade duty. Citing a relevant case, the Tribunal concluded that no penalty under Rule 25 of the Central Excise Rules applied in this case. Consequently, the appellant's appeal was allowed based on the above analysis, and no penalty under Rule 25 was imposed.This detailed analysis of the judgment highlights the issues of default in duty payment, cenvat credit utilization, liability for interest, and imposition of penalties, providing a comprehensive understanding of the Tribunal's decision in the case.