2015 (5) TMI 55 - AT - Central Excise

Tribunal clarifies Central Excise duty payment dispute, grants relief on pre-deposit, duty demand, interest, and penalty.

M/s Ess Kay Enterprises Versus Commissioner of Central Excise, Delhi-I

The Tribunal addressed the non-payment of Central Excise duty by the appellant and the dispute over payment during default periods without utilizing ... CENVAT Credit - Whether during the period of default in discharge of monthly duty liability for a particular month beyond the period of one month from the due date, the assessee is required to pay duty without utilising the Cenvat credit as per the provisions of Rule 8 (3A) - held that:- Madras High Court in the case of Unirols Airtex vs. Assistant Commr. of C. Ex., Coimbatore (2013 (12) TMI 1398 - MADRAS HIGH COURT) has held that during the period of default beyond the period of one month from due date, the assessee as per the provisions of Rule 8 (3A) is required to discharge the duty liability without utilising the Cenvat credit, Hon'ble Gujarat High Court in the case of Indsur Global Ltd. vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] has gone into the constitutionality of the provisions of Rule 8 (3A) and has held in clear terms that the condition contained in sub-Rule (3A) of Rule 8 for payment of duty during the period of delay beyond the period of one month from the due date without utilising the Cenvat credit, till the Assessee pays the outstanding amount is constitutional. In view of this, the requirement of pre-deposit of the duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed. - Stay granted. Issues:1. Non-payment of Central Excise duty by the appellant leading to demand, interest, and penalty.2. Dispute regarding payment of duty without utilizing Cenvat credit during a default period.Analysis:Issue 1: Non-payment of Central Excise duty and imposition of demand, interest, and penaltyThe appellant, a manufacturer of various products, failed to pay the full Central Excise duty amount for clearances made in May 2013. Despite paying a partial amount through PLA by the due date, a balance remained unpaid. The default continued beyond the stipulated period, triggering the application of sub-Rule (3A) of Rule 8 of the Central Excise Rules, 2002. Consequently, the appellant lost the facility to discharge their duty liability monthly using Cenvat credit. The Department issued a show cause notice for demanding the unpaid amount along with interest and imposing a penalty. The appellant contended that the non-payment was due to a clerical mistake, as they had sufficient Cenvat credit balance to cover the duty. The Commissioner, while accepting this contention, confirmed the duty demand, interest, and imposed a penalty. The appellant challenged this order through an appeal.Issue 2: Dispute over payment of duty without utilizing Cenvat credit during a default periodThe main point of contention revolved around whether, during a default period in discharging monthly duty liability beyond one month from the due date, the assessee should pay duty without utilizing Cenvat credit as per Rule 8 (3A). The appellant cited a judgment of the Hon'ble Gujarat High Court questioning the constitutionality of Rule 8 (3A) conditions for payment without utilizing Cenvat credit during a delay period. While the Hon'ble Madras High Court had held that duty should be paid through cash without using Cenvat credit during such default periods, the constitutional aspect had not been addressed. The Tribunal noted that the Hon'ble Gujarat High Court had upheld the constitutionality of Rule 8 (3A) conditions. Consequently, the requirement of pre-deposit for the duty demand, interest, and penalty was waived for the appeal hearing, and recovery was stayed. The stay application was allowed.In conclusion, the Tribunal addressed the issues of non-payment of Central Excise duty and the dispute over payment during default periods without utilizing Cenvat credit. The judgment clarified the constitutional validity of Rule 8 (3A) conditions and granted relief to the appellant in terms of pre-deposit requirements for the appeal hearing.