SUNLAC PAINTS PVT. LTD. Vs. CCE

JUDGEMENT

(1.) HAVING examined the records and heard both the sides, I am of the view that the appeal itself has to be finally disposed of at this stage. Accordingly, 1 allow the present application and proceed to deal with the appeal.

(2.) THE appellants are a SSI unit engaged in the manufacture of excisable goods falling under Chapters 32 and 38 of the Central Excise Tariff Schedule. They had opted for the facility of monthly payment of duty. Under that scheme, they had to pay duty for a given calendar month on or before the 15th day of the succeeding month. Under Rule 3(3) of the CENVAT Credit Rules, 2001, which was being followed by the appellants during the material period, they could utilize for payment of duty on their products, Cenvat credit to the extent available upto the last date of the calendar month in respect of which the duty was paid. When the appellants paid duty on the goods cleared during the months of September to December 2001, they utilized Cenvat credit, on each occasion, in excess of what had accrued to them during the relevant month. For instance, while paying duty for September 2001 on 8.10.2001, they availed excess credit of Rs. 24,067 which was in excess of the credit which they had acquired upto 30th September, 2001. All the excess credits so availed by the appellants for the period September to December, 2001 totalled to Rs. 4,46,928. The Department, while examining the ER -ls of the party, took note of the wrong availment of Cenvat credit and the Assistant Commissioner of Central Excise, by order dated 26.4.2002, invoked Rule 8(4)(ii) of the Central Excise Rules, 2001 against the party and withdrew for a period of two months the facility to pay Central Excise duty on monthly basis. The said period of two months was to start from the date of communication of the order. The order was communicated to the party on 1.5.2002. Going by the terms of the operative part of the order, one could reasonably presume that the period of two months was to expire on 30.6.2002 in the event of the duty dues having been paid up by that date. In the event of further delay of payment, the period of suspension of the monthly facility would extend upto to the date on which the dues were paid up. The appellants paid the amount of Rs. 4,46,928 by appropriate debit in PLA on 22.7.2002. It has been submitted by the Counsel for the appellants to -day that the excess Cenvat credits taken in respect of the aforesaid period have been reversed by them in their Cenvat account on 31.3.2003.

(3.) A show cause notice was issued by the Department on 26.7.2002 for recovering duty of Rs. 4,46,928 from the party under Section 11 -A of the Central Excise Act, charging interest on the duty under Rule 8 of the Central Excise Rules (No. 2) 2001 and for imposing penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11 -AC of the Central Excise Act. In their reply to this notice, the appellants submitted that they had already paid up the duty with interest thereon. They also pleaded that no such penalty as proposed in the show cause notice was liable to be imposed on them in the particular facts and circumstances of the case. The defence against penalty is contained in the following paragraph of their reply: