RG23A Part-II debit as duty discharge, but delayed payment still attracts interest and equal penalty was reduced.

For the period before 31-03-2005, debit of duty in RG23A Part-II was accepted as valid discharge of duty liability even after forfeiture of the fortnightly payment facility, though the assessee was required to pay through PLA on a consignment-wise basis. Because the duty was not discharged within the prescribed time, interest remained payable for the delay. The facts did not justify the stringent equal-penalty consequence under Rule 25 read with Section 11AC, so the equal penalty was set aside and replaced with a token penalty of Rs. 10,000.

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Issues: (i) Whether duty debited in RG23A Part-II could be treated as discharge of duty liability for the period prior to 31-03-2005 after forfeiture of the fortnightly payment facility; (ii) whether interest was payable for delayed discharge of duty liability; (iii) whether equal penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 was warranted.

Issue (i): Whether duty debited in RG23A Part-II could be treated as discharge of duty liability for the period prior to 31-03-2005 after forfeiture of the fortnightly payment facility.

Analysis: The appellant had been barred from deferred payment under Rule 8(4)(ii) of the Central Excise Rules, 2001 and was required to pay duty through PLA on a consignment-wise basis. The duty was instead debited in RG23A Part-II. For the period prior to 31-03-2005, the Tribunal relied on the Larger Bench view that such debit in RG23A Part-II was acceptable as discharge of duty liability even after forfeiture of the facility.

Conclusion: The duty debited in RG23A Part-II was held to be valid discharge of duty liability.

Issue (ii): Whether interest was payable for delayed discharge of duty liability.

Analysis: Although the duty debit in RG23A Part-II was accepted as discharge, the duty was not paid within the prescribed time. Delay in compliance with the duty payment obligation attracted interest.

Conclusion: Interest liability was upheld against the assessee.

Issue (iii): Whether equal penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 was warranted.

Analysis: The violation was confined to non-compliance with the direction to pay duty in PLA on a consignment-wise basis. The facts did not justify invocation of the stringent equal-penalty consequence contemplated by Section 11AC. A nominal penalty was considered sufficient in the circumstances.

Conclusion: Equal penalty was set aside and substituted by a token penalty of Rs. 10,000.

Final Conclusion: The appeal succeeded in part: the duty debit in RG23A Part-II was accepted as valid discharge for the relevant period, interest was maintained, and the penalty was reduced to a token amount.

Ratio Decidendi: For the period prior to 31-03-2005, debit of duty in RG23A Part-II could be treated as discharge of duty liability notwithstanding forfeiture of the fortnightly payment facility, but delayed payment still attracted interest and the stringent equal-penalty provision was not automatically attracted on the facts.

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