Cheque payment treated as timely on presentation; belated bank clearance did not create a duty default.

Rule 8(1) of the Central Excise Rules treats the date of presentation of a cheque to the designated bank as the date of duty payment, subject to realisation. On the facts, the cheques were presented within the prescribed time and were eventually realised; the delay arose in banking clearance, and the assessee paid the interest attributable to that delay. The matter was therefore treated as a clearance issue rather than a duty default, and the proposed denial of CENVAT credit payment, together with duty, interest and penalties under Rule 8(3A), was not sustainable.

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Issues: Whether duty paid by cheque within the prescribed time, though realised belatedly on re-presentation, amounted to default warranting denial of CENVAT credit payment and confirmation of duty, interest and penalties under Rule 8(3A) of the Central Excise Rules, 2002.

Analysis: Rule 8(1) read with its explanation treats the date of presentation of a cheque to the designated bank as the date of payment of duty, subject to realisation. The cheques were presented within time and were ultimately realised, while the delay arose from the banking clearance mechanism and the assessee also paid the interest attributable to belated realisation. The factual matrix showed that the revenue loss was made good and that the matter was more appropriately viewed as a clearance issue than a default in duty payment. The reasoning adopted by the adjudicating authority was accepted as being reasoned and legally sustainable. In addition, the challenge based on Rule 8(3A) did not advance the Revenue's case in the present facts.

Conclusion: There was no default in duty payment, and the proposals for demanding duty in cash by denying CENVAT payment, together with interest and penalties, were not sustainable.

Final Conclusion: The appeals failed and the Revenue's challenge to the dropping of duty demand, interest and penalties was rejected.

Ratio Decidendi: Where duty is paid by cheque within time and the cheque is ultimately realised, the payment is to be treated as made on the date of presentation subject to realisation, and a belated clearance process does not by itself establish a duty default warranting denial of payment through CENVAT credit or imposition of consequential liabilities.

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