Cenvat credit remained usable after forfeiture of deferred duty payment facility; exclusive PLA payment was not required.

Forfeiture of the fortnightly duty payment facility under the pre-amendment Central Excise Rules did not by itself extinguish the assessee's entitlement to use Cenvat credit for payment of duty. The later insertion of an express non-obstante clause showed that any restriction on using credit was introduced only prospectively. For the period before that amendment, duty could be discharged either through the PLA or by utilising Cenvat credit, and interest and penalty did not follow merely because payment was not made exclusively through the PLA.

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Issues: Whether, during the period when the facility for payment of duty on a fortnightly basis stood forfeited, the assessee was required to pay duty only through the PLA and whether non-payment in that manner attracted interest and penalty.

Analysis: The reference turned on the effect of the forfeiture provision in the Central Excise Rules as they stood before the insertion of the later non-obstante clause. The Tribunal noted that the relevant provision was pari materia with the earlier rule considered by the Kerala High Court, which had held that forfeiture of the instalment facility did not by itself extinguish the existing entitlement to utilise Cenvat credit for payment of duty. It was further noted that the later amendment inserting an express overriding clause showed that the restriction on use of credit was brought in only prospectively. For the period in dispute, the assessee could therefore discharge the duty liability either from PLA or by utilising Cenvat credit, and the consequence of interest and penalty did not follow merely because duty was not paid exclusively through PLA.

Conclusion: The answer was in the negative and in favour of the assessee.

Ratio Decidendi: Where the statute had not yet introduced an express overriding restriction, forfeiture of the deferred-payment facility did not take away the assessee's vested entitlement to utilise Cenvat credit for payment of duty, and failure to pay through PLA alone did not attract interest or penalty.

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