CENVAT credit payment after default cannot be recovered again in cash; duplicate interest and penalty also fail absent evasion.

Duty paid through CENVAT credit during the default period could not be recovered again in cash once the restriction on utilisation after default was held invalid; the demand was unsustainable because the liability had already been discharged. Interest also could not be demanded again where the duty for the defaulted months had already been paid along with interest. Penalty was not leviable because the default was attributable to financial constraint and there was no fraud, suppression, or intent to evade duty. The impugned order was therefore not sustainable.

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Issues: (i) Whether duty defaulted beyond the due date could be demanded again in cash despite payment through CENVAT credit account; (ii) Whether interest could be demanded again where the duty for the default period had already been paid along with interest; (iii) Whether penalty was sustainable on the facts of the case.

Issue (i): Whether duty defaulted beyond the due date could be demanded again in cash despite payment through CENVAT credit account.

Analysis: Rule 8 of the Central Excise Rules, 2002 prescribes the due date for payment of duty and the consequence of delay. The restriction in Rule 8(3A), insofar as it required payment without utilising CENVAT credit after default beyond thirty days, had already been declared ultra vires and unconstitutional by the Gujarat High Court. Once that restriction was invalidated, payment through CENVAT credit during the default period could not be treated as improper merely because it was not made from current account or cash. Since the duty for the relevant clearances had in fact been paid through CENVAT credit, recovery of the same amount again was not justified.

Conclusion: The demand of duty again in cash was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether interest could be demanded again where the duty for the default period had already been paid along with interest.

Analysis: The record showed that the duty attributable to the defaulted months had been paid along with interest. In those circumstances, a further confirmation of interest liability on the same amount was inconsistent with the statutory scheme and with the actual discharge already made by the assessee.

Conclusion: The demand of interest again was not sustainable and the issue was decided in favour of the assessee.

Issue (iii): Whether penalty was sustainable on the facts of the case.

Analysis: The default was found to be due to financial constraint and not attributable to fraud, collusion, wilful misstatement, suppression, or intent to evade duty. In the absence of such culpable conduct, penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 could not be justified.

Conclusion: Penalty was not leviable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order could not be sustained because the duty was validly discharged through CENVAT credit, no further interest was payable, and the circumstances did not warrant imposition of penalty.

Ratio Decidendi: Once the statutory restriction on utilisation of CENVAT credit after default is held invalid, duty paid through CENVAT credit during the default period cannot be recovered again in cash, and penalty is not imposable absent fraud or wilful evasion.

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