Duty payment via Cenvat credit not valid during default period. Waiver granted, interest and penalty imposed.

The Tribunal held that duty payment through Cenvat credit during a default period does not discharge duty until the default amount is rectified and interest is paid. The appellant was granted a 100% waiver of pre-deposit based on a previous case. The matter was remanded for calculating interest and confirming a penalty of Rs. 5000. The appellant was directed to pay the interest within 15 days.

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Issues:
Appeal against duty demand due to default in payment and utilization of Cenvat Credit.

Analysis:
The appeal before the Appellate Tribunal involved a duty demand confirmed against the appellant due to default in payment and the utilization of Cenvat Credit during the defaulted period for duty payment. The appellant contended that although they defaulted in duty payment, they subsequently paid the defaulted amount along with interest. The issue of reversal of Cenvat credit utilized for duty payment during the default period was addressed by referring to a previous case involving Solar Chemferts Pvt. Ltd. vs. Commissioner of Central Excise, Thane -I. The Tribunal held that duty payment through Cenvat credit during a default period would not constitute proper discharge of duty until the default amount is rectified and interest is paid. The consequence of such default included the payment of interest and penalty. However, once the defaulted amount is paid, duty payment through Cenvat credit becomes valid. The Tribunal found that the appellant was entitled to a 100% waiver of pre-deposit based on the decision in the Solar Chemferts case.

The Tribunal proceeded to dispose of the appeal in light of the Solar Chemferts decision, remanding the matter back to the adjudicating authority to ascertain the amount of interest payable by the appellant and confirm the penalty under Rule 27 of the Central Excise Rules 2002 to Rs. 5000/-. The adjudicating authority was directed to calculate the interest within 30 days and the appellant to pay the amount within 15 days from the date of the order. The appeal and stay application were both disposed of accordingly, with the appellant instructed to comply with the payment of interest as determined by the adjudicating authority within the specified timeframe.

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