Rule 8 forfeiture requires duty payment from account-current, while unpaid duty still needs fresh adjudication and penalty review.

Forfeiture of the fortnightly payment facility under Rule 8 requires duty on each consignment to be paid from the account-current during the forfeiture period; payment through Cenvat credit is not valid compliance. Any unpaid duty still has to be recovered through a show cause notice and fresh adjudication under Section 11A(1), and penalty must be separately considered under the penalty rule. The earlier forfeiture order does not by itself replace statutory adjudication of duty demand or penalty, so the matter must be re-adjudicated after observance of natural justice.

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Issues: (i) Whether, after forfeiture of the facility of fortnightly payment under Rule 8, duty for each consignment had to be discharged from account-current and could not be paid through Cenvat credit; (ii) Whether recovery of the unpaid duty and consideration of penalty required fresh adjudication under Section 11A(1) and could not rest merely on the earlier forfeiture order.

Issue (i): Whether, after forfeiture of the facility of fortnightly payment under Rule 8, duty for each consignment had to be discharged from account-current and could not be paid through Cenvat credit.

Analysis: Rule 8 of the Central Excise (No. 2) Rules, 2001 provided that on the third default in a financial year the assessee would forfeit the instalment facility for two months and, during that period, would be required to pay duty for each consignment by debiting the account-current. The order of forfeiture was a consequence of default and operated independently of any later desire to restore the facility. Payment through Cenvat credit in that period did not satisfy the prescribed mode of payment.

Conclusion: The duty was required to be paid from account-current during the forfeiture period, and payment through Cenvat credit was not a valid compliance with Rule 8.

Issue (ii): Whether recovery of the unpaid duty and consideration of penalty required fresh adjudication under Section 11A(1) and could not rest merely on the earlier forfeiture order.

Analysis: Sub-rule (4) of Rule 8 deemed non-compliance to be clearance without payment of duty and attracted the consequences under the Rules, but the actual demand of unpaid duty had to be made under Section 11A(1) of the Central Excise Act by issuance and adjudication of a show cause notice. Penalty was also required to be examined under Rule 25 of the Central Excise (No. 2) Rules, 2001. The earlier forfeiture order did not dispense with statutory adjudication of the demand.

Conclusion: Fresh adjudication of the duty demand and penalty was necessary under Section 11A(1) and Rule 25, and the matter had to be remanded.

Final Conclusion: The dispute on liability was not finally determined on the existing record and required re-adjudication after observance of natural justice, while the challenge to the respondents' cross-objection failed.

Ratio Decidendi: When Rule 8 forfeiture is triggered for repeated default, the assessee must pay duty in the prescribed manner during the forfeiture period, and any unpaid duty must still be recovered through a lawful show cause notice and adjudication under Section 11A(1), with penalty separately examined under the relevant penalty rule.

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