CENVAT credit after duty default under Rule 8(3A): cash re-payment not required, but interest liability remains and penalty was reduced.

For defaults in payment of central excise duty beyond the period prescribed under Rule 8(3A) of the Central Excise Rules, 2002, duty already paid by utilising CENVAT credit was not required to be paid again in cash merely because the default occurred. The applicable consequence was liability to pay interest, and the Tribunal also reduced the penalty in light of its earlier decisions on the same point. The note thus states that cash re-payment was not insisted upon solely on account of CENVAT utilisation during the default period, while interest liability remained enforceable.

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Issues: Whether, on default in payment of central excise duty beyond the period prescribed under Rule 8(3A) of the Central Excise Rules, 2002, duty paid by utilising CENVAT credit was required to be paid again in cash and, if not, what consequential interest and penalty relief was to be granted.

Analysis: The Tribunal accepted that the issue was covered by its earlier decisions, which had held that in cases of default under Rule 8(3A), it was not necessary to deposit the entire amount again in cash merely because CENVAT credit had been utilised. The Tribunal accepted the position that payment of interest was sufficient, and noted the appellant's acceptance of liability to pay interest and any penalty imposed. In view of the precedent relied upon, the Tribunal also reduced the penalty.

Conclusion: The appellant was not required to pay the duty amount again in cash solely because CENVAT credit had been utilised, but was directed to pay the interest, and the penalty was reduced to Rs. 5,000/-.

Final Conclusion: The appeal was allowed to the extent of granting relief against cash re-payment of duty and by reducing the penalty, while maintaining the liability to pay interest.

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