Double Cenvat credit and Rule 8 breach: ultra vires daily interest cannot stand, while penalty may be reduced on mitigation.

Twice availing Cenvat credit on the same invoices can leave insufficient balance in the RG 23A account at the time of duty debit, and the resulting clearance may be treated as contrary to Rule 8 of the Central Excise Rules, 2002 because duty was not effectively paid by the prescribed date. The specific interest charge of Rs. 1,000 per day under Rule 8(3) was not enforceable because that rate had been held ultra vires, so interest was confined to the otherwise applicable rate. Penalty under Rule 25 remained attracted, but voluntary detection and prompt correction supported substantial reduction on facts.

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Issues: Whether the invocation of Rule 8(3) of the Central Excise Rules, 2002 was justified on account of twice availing Cenvat credit on the same invoices, and whether the interest and penalty determined under that rule were sustainable.

Analysis: The credit was admittedly taken twice on the basis of the same documents, and the second availment resulted in insufficient balance in the RG 23A account when duty was debited. On that footing, the clearance was treated as one without payment of duty and a contravention of Rule 8, which requires payment by the 5th of the following month. At the same time, the specific interest amount of Rs. 1,000 per day under Rule 8(3) could not be sustained because that rate had been held ultra vires, and the applicable interest was therefore confined to the rate otherwise prescribed. The penal provision under Rule 25 was attracted, but the voluntary detection and prompt rectification of the mistake warranted substantial mitigation.

Conclusion: Rule 8(3) was rightly invoked, the interest demand at Rs. 1,000 per day was not sustainable, the penalty under Rule 25 was maintainable but reduced, and the appeal succeeded only to the limited extent of reducing the interest and penalty.

Final Conclusion: The order below was sustained on the core finding of contravention, but the monetary consequences were moderated by substituting the higher interest component and reducing the penalty.

Ratio Decidendi: Where excess Cenvat credit is taken twice and the assessee's own account shows insufficient balance at the time of duty debit, the clearance may be treated as in breach of Rule 8, but an interest rate found ultra vires cannot be enforced and penalty may be moderated on facts.

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