2005 (98) ECC 426 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J)

Aeon's Construction Products Ltd.

Versus

CCE, Chennai

Appeals No. E/PD/447/2004 & E/869/2004

[Arising out of Order-in-Appeal No. 59/2004 (M-II) dated 29.4.2004 passed by the Commissioner of Central Excise (Appeals), Chennai]

Stay Order No. 690/2004
Final Order 947/2004, dt. 28.10.2004, Certified on 4.11.2004

Cenvat credit

Duty -- Rule 8(4) of the Central Excise (No. 2) Rules, 2001 r/w Section 11AB of the Central Excise Act -- Assessee did not fully comply with the requirement of Rule 8(4) inasmuch as the payment of duty during the period of forfeiture was made through debits in cenvat account -- No intent to evade payment of duty -- The finding of the Commissioner (Appeals) that the appellants were liable to pay duty wholly by way of PLA debit during period of forfeiture was upheld and entitled to take re-credit of duty.

Interpretation

Rule 8(4) of the Central Excise (No. 2) Rules, 2001 -- The provision is applicable to payment of duty during the period of forfeiture of the fortnightly facility. It prescribes that such payment be effected by way of debit to the account current. This account current is, obviously, the Personal Ledger Account (PLA).

Penalty (C. Excise)

Rule 25 of the Central Excise (No. 2) Rules, 2001 -- No intent to evade payment of duty paid a part of duty for period of forfeiture by way of debit in cenvat account and Rule 8(4) of the Central Excise (No. 2) Rules, 2001 -- Penalty set aside.

PRESENT :

Shri N. Viswanathan, Adv. for the appellant.

Smt. R. Bhagya Devi, SDR for the respondent.

Case Cited :

Vidushi Wires Pvt. Ltd. v. UOI, 2003 (156) ELT 168 (Bom).................................... [Para 3]

Per : P.G. Chacko (Oral)

After examining the records and hearing both sides, I am of the view that the appeal itself requires to be finally disposed of at this stage. Accordingly, after dispensing with pre-deposit, I proceed to deal with the appeal.

2. The appellants were availing the facility of fortnightly payment of duty in terms of Rule 8 of the Central Excise (No. 2) Rules, 2001 during the period of dispute (September-October 2001). Under the above rule, they were liable to pay duty for the first fortnight of a month on or before the 20th day of that month. In respect of the second fortnight of a month, they were liable to pay duty on or before the 5th day of the succeeding month. The appellants failed to pay duty within the prescribed time in respect of the first fortnight of September 2001 and both the fortnights of October 2001. On account of these defaults, the jurisdictional Dy. Commissioner ordered forfeiture of the above facility. This order was received by the party on 3.12.2001. Therefore, in terms of Rule 8 ibid, the forfeiture was for a period of two months commencing on 4.12.2001. After expiry of this period, assessee started paying duty again on fortnightly basis. During the period of forfeiture, they paid duty partly through debits in PLA and partly through debits in Cenvat account. The Cenvat debits were to the extent of Rs. 2,40,893. The part-payment of duty through debits in Cenvat account was objected to by the department in a show-cause notice issued on 20.12.2002, wherein the above duty with interest was demanded and a penalty was proposed. The assessee contested their notice. The original authority, in adjudication of the dispute, confirmed the demand of duty to the extent of Rs. 2,40,893 against the assessee after recording a finding of short-payment of duty equivalent to the Cenvat credit availed. That authority also charged interest on this amount of duty under Section 11AB of the Central Excise Act and imposed a penalty of Rs. 25,000 on the assessee under Rule 25 of the Central Excise (No. 2) Rules, 2001 for alleged contravention of Rule 8 ibid by them. The appeal preferred by the assessee to the Commissioner (Appeals) against the decision of the original authority did not succeed. Hence, the present appeal.

3. Ld. Counsel has argued that the appellants were entitled to utilize Cenvat credit for payment of duty on their final product in terms of Rule 3(3) the Cenvat Credit Rules, 2001 during the relevant period and that this was a substantive right which was not curtailed in any manner by Rule 8(4) of the Central Excise (No.2) Rules, 2001. Ld. SDR countered by submitted that the general provisions of Rule 3(3) ibid were to be restrictively applied to the special situation covered by Rule 8(4) of the Central Excise (No. 2) Rules, 2001. In other words, the special provisions of Rule 8(4) would prevail over the general provisions of Rule 3(3) ibid. In this connection, reliance has been placed on the Bombay High Court's ruling in Vidushi Wires Pvt. Ltd. v. UOI, 2003 (156) ELT 168 (Bom), wherein compliance with Rule 8(1) [which prescribed the manner of payment of duty] was held to be mandatory and non-compliance was held to have penal consequences.

4. After giving careful consideration to the submissions, I find much in the argument of the SDR. The penal consequence referred to by the Hon'ble High Court was what was laid down under sub-rule (4) of Rule 8 ibid. This sub-rule reads as under:

"If the assessee defaults--

(i) in payment of any one instalment and the same is discharged beyond a period of thirty days from the date on which the instalment was due in a financial year, or

(ii) in payment of instalment by the due date for the third time in a financial year, whether in succession or otherwise.

then, the assessee shall forfeit the facility to pay the dues in instalments under the rule for a period of two months, starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in this regard or till such date on which all dues are paid, whichever is later, and during this period the assessee shall be required to pay excise duty for each consignment by debit to the account current and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow".

5. The above provision is applicable to payment of duty during the period of forfeiture of the fortnightly facility. It prescribes that such payment be effected by way of debit to the account current. This account current is, obviously, the Personal Ledger Account (PLA). The assessee, in the instant case, did not fully comply with this requirement inasmuch as the payment of duty during the period of forfeiture was made partly through debits in Cenvat account. As rightly pointed out by learned SDR, the above provision is penal to the extent of forfeiting the assessee's right to avail Modvat facility in payment of duty on final product during the period of forfeiture of fortnightly facility. At this stage, learned Counsel submits, under instructions, that the appellants are agreeable for payment of the aforesaid amount of duty in cash, if they are allowed to make re-credit of duty in their Cenvat account. I am of the view that this suggestion, which is not prejudicial to the Revenue, should be accepted.

6. Ld. Counsel has argued that the appellants had no intent to evade payment of duty. This argument is evidenced by the correspondence between the appellants and the department, available on record. One of these letters is a letter dated 4.12.2001 of the assessee addressed to the Dy. Commissioner of Central Excise, wherein they informed that they would start paying duty for each consignment by debit to the account current from out of their Cenvat as well as PLA accounts. In another letter dated 12.2.2002, the party stated as under:

"We informed you vide our above quoted letter that we will be paying the excise duty for each consignment by debit to the account current from out of our Cenvat as well as PLA accounts from 4.12.2001. We have complied with your above instruction scrupulously and discharged the duty liability on a day-to-day basis.

In this connection, since the period of two months reckoned from 3.12.2001 i.e., the date of receipt of your order is over as on 3.2.2002, we wish to inform you that we will be paying the Central Excise duty on a fortnightly basis for today as permitted under Rule 8 of the Central Excise (No.2) Rules, 2001. A statement for the period 3.12.2001 up to 11.2.2002 drawn up on daily basis is enclosed to this letter for your kind reference."

There is no evidence on record to indicate that the department responded to the above letters of the assessee. Noticeably, the relevant show-cause notice was issued as late as in December 2002. There was a long spell of "departmental silence" between the assessee's letters and the show-cause notice. It is obvious in these circumstances that the assessee had no intent to evade payment of duty. Apparently, it was on the basis of their understanding of sub-rule (4) of Rule 8 ibid that they paid a part of the duty for the period of forfeiture by way of debit in Cenvat account. In the absence of intent to evade payment of duty, it was not open to the lower authorities to invoke Rule 25 of Central Excise (No. 2) Rules, 2001 for penalizing the assessee. Therefore, the penalty of Rs. 25,000 imposed on the appellants requires to be vacated.

7. In the result, the finding of the Commissioner (Appeals) that the appellants were liable to pay duty wholly by way of PLA debit during the period of forfeiture is upheld but the penalty imposed on them is set aside. The appellants are directed to pay the duty (with interest thereon in terms of Section 11AB) in cash within a period of 4 weeks, in which event they will be entitled to take re-credit of the duty which they debited in Cenvat account during the period of forfeiture. The impugned order will stand modified to the above extent. The appeal stands disposed of.

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