CENVAT credit allowed for duty payment during forfeiture of fortnightly facility; PLA-only demand and penalty not sustainable.

During forfeiture of the fortnightly duty-payment facility, duty could still be discharged through CENVAT credit under Rule 8(4) of the Central Excise Rules, as the relevant provision was treated as pari materia with the earlier rule until the later non obstante amendment. The Tribunal followed the Larger Bench view in Noble Drugs and later consistent decisions, and held that payment through PLA alone was not mandatory for that period. On that basis, non-payment in PLA or cash did not, by itself, justify interest or penalty, and the demand for duty, interest, and penal consequences could not stand.

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Issues: Whether, during the period of forfeiture of the facility of payment of duty on fortnightly basis, the assessee could discharge the duty liability by utilising CENVAT credit and whether interest and penalty were exigible for not paying the duty in PLA or cash.

Analysis: The dispute concerned application of Rule 8(4) of the Central Excise Rules in the context of forfeiture of the fortnightly payment facility. The Tribunal relied on the Larger Bench view in Noble Drugs, which held that the relevant provision was pari materia with the earlier rule and that, for the period prior to the later non obstante amendment, duty could be discharged either from PLA or by utilising CENVAT credit. The Tribunal also noted that the same approach had been followed consistently and approved in later decisions. On that basis, the finding was that non-payment through PLA alone did not justify levy of interest or penalty.

Conclusion: The assessee was entitled to discharge the duty through CENVAT credit during the forfeiture period, and the demand to pay duty and interest in PLA or cash, along with the penal consequences, could not stand.

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