Cenvat credit compliance treated as valid duty payment, making penalty under Rule 173Q unsustainable.

Payment of central excise duty through Cenvat credit was treated as valid compliance with Rule 173G(e) because clause (b) allowed duty to be discharged either by debit to the account current or by utilisation of Cenvat credit. Reading the provisions together, utilisation of credit was considered equivalent to debit to the account current, so the assessee had not breached the payment requirement. On that basis, penalty under Rule 173Q was held unsustainable.

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Issues: Whether payment of central excise duty through Cenvat credit, instead of debit to the account current or PLA, satisfied Rule 173G(e) of the Central Excise Rules and therefore barred imposition of penalty under Rule 173Q.

Analysis: Rule 173G(e) required payment for each consignment by debit to the account current referred to in clause (b). Clause (b) itself permitted discharge of duty liability either by debiting the account current or by utilizing CENVAT credit. Reading the two provisions together, utilization of Cenvat credit was treated as equivalent to debit to the account current. The payment made by the appellant through Cenvat credit therefore met the rule requirement, and there was no breach attracting penalty.

Conclusion: The issue was decided in favour of the assessee. Payment of duty through Cenvat credit was held to be valid compliance under Rule 173G(e), and the penalty was not sustainable.

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