Fortnightly duty payment facility requires action by the proper officer; revenue neutrality also defeats extended limitation.

Withdrawal of the fortnightly central excise duty payment facility under Rule 173G(1)(e) must be made by the proper officer, understood as the Assistant or Deputy Commissioner, and not by a Superintendent acting without a show cause notice or proper order; such withdrawal is contrary to the rule and natural justice. In addition, where Cenvat credit and corresponding Modvat credit create revenue neutrality, the element of intent to evade duty is negated and the extended limitation period is not attracted, so the duty demand cannot be sustained on limitation grounds.

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Issues: (i) Whether the Superintendent of Central Excise had authority to withdraw the fortnightly duty payment facility under Rule 173G(1)(e) of the Central Excise Rules. (ii) Whether the duty demand was unsustainable on the grounds of revenue neutrality and limitation.

Issue (i): Whether the Superintendent of Central Excise had authority to withdraw the fortnightly duty payment facility under Rule 173G(1)(e) of the Central Excise Rules.

Analysis: The facility for fortnightly payment could be withdrawn only by the proper officer, understood to be the Assistant or Deputy Commissioner. Withdrawal by a Superintendent, without a show cause notice and without an order by the proper officer, was held to be contrary to the rule and violative of principles of natural justice.

Conclusion: The withdrawal of the facility by the Superintendent was invalid and the assessee succeeded on this issue.

Issue (ii): Whether the duty demand was unsustainable on the grounds of revenue neutrality and limitation.

Analysis: The assessee had availed Cenvat credit and would have been eligible for corresponding Modvat credit even if duty had been paid on consignment basis, resulting in revenue neutrality. In such a situation, the element of intent to evade duty was negatived and the demand was also held to be time-barred.

Conclusion: The demand could not be sustained on the grounds of revenue neutrality and limitation, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Withdrawal of a statutory duty-payment facility must be made by the proper officer in accordance with the prescribed procedure and principles of natural justice, and where the matter is revenue neutral, allegations of intent to evade duty and extended limitation are not attracted.

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