SHARP INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellants are the manufacturers of printed and laminated plastic films which attracts Central Excise duty. The appellants are paying Central Excise duty and also availing credit of duty paid on inputs under Cenvat Credit Rules, 2004. During the month of October, 2010, they cleared excisable goods, on which, as per self -assessment made by them, duty of Rs. 1,51,21,904/ - was payable by them. As per Rule 8(1) of the Central Excise Rules, 2002, the said duty was required to be paid by 5 -11 -2010. The appellants adjusted Rs. 1,43,29,033/ - from the Credit Account relating to inputs/input services/Capital Goods. The balance duty amounting to Rs. 7,92,871/ - was required to be paid by them in cash through Account Current. In the monthly return filed by them, they have shown the said amount of Rs. 7,92,871/ - as paid in cash through Account Current, even though no such amount was paid by them. On 25 -11 -2010, they adjusted the said amount from the Credit of Inputs, etc., in contravention of first proviso to sub -rule (4) of Rule 3 of Cenvat Credit Rules, 2004. As per Rule 8 of Central Excise Rules, 2002, the appellants are also permitted to make the said payment within 30 days along with interest. However, the appellants failed to deposit the said amount in cash as required under the Rules. The said amount was finally paid by them in cash vide GAR -7 challan on 4 -6 -2011 and interest on the said defaulted amount was paid on 5 -7 -2011. The department, during the scrutiny of the return for the month of October and November, 2010, detected the above mentioned irregularity and informed the appellants vide letter dated 31 -1 -2011 and also vide letter dated 15 -2 -2011. As per the provisions of sub -rule (3A) of Rule 8 of Central Excise Rules, 2002, introduced vide Notification No. , dated 1 -6 -2006, if the assessee defaults in payment of duty beyond 30 days from the due date, the assessee, shall, pay excise duty for each consignment at the time of removal, without utilizing the Cenvat credit, till the date the assessee pays the outstanding amount including interest thereon 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. During the intervening period i.e. from 6 -12 -2010 to 4 -7 -2011, the appellants did not clear the consignments paying the excise duty for each consignment at the time of removal without utilizing Cenvat credit as stipulated in Rule 8(3A) of the Central Excise Rules. The appellants, instead, continued to clear the goods without paying consignment -wise duty. They continued paying duty on monthly basis. Moreover, they continued to utilise the Cenvat credit of duty for such payments. Since the said act was in contravention of Rule 8(3A) of the Central Excise Rules, 2002, a show cause notice dated 30 -11 -2011 was issued to them demanding duty of Rs. 8,00,09,346/ - which was equivalent to the amount of Cenvat credit utilized for clearance of goods during the period 6 -12 -2010 to 4 -7 -2011.

(2.) ANOTHER show cause notice dated 23 -7 -2012 was issued to them demanding duty of Rs. 13,12,25,602/ - in respect of the goods cleared during 5 -7 -2011 to 31 -3 -2012. The demand was made equivalent to the Cenvat credit utilized by the appellants during the said period. The said demand was made on the grounds that the appellants have defaulted in payment of Rs. 8,00,09,346/ - (covered by the first show cause notice) through cash and therefore the provisions of Rule 8(3A) of Central Excise Rules continues to operate for the subsequent period viz. 5 -7 -2011 onwards.

(3.) LD . Commissioner (A.R.) on the other hand opposed the contention of the appellants. Ld. A.R. argued that earlier under the Central Excise Rules, duty was required to be paid before removal of the goods. Rules were liberalized and a scheme of fortnightly payment was introduced which was later on made monthly payment of excise duty. As there were large number of instances where various manufacturers defaulted in payment of duty, Rules were amended to check the situation. Rules have undergone number of changes and Rule 8(3A) is the Rule as of now. The ld. A.R. further argued that a plain reading of the sub -rule would indicate that if an assessee defaults in making the monthly payment including further period of 30 days during which he can pay the defaulted amount along with interest, the manufacturer assessee is required to clear each consignment on payment of duty and also without utilizing the Cenvat credit. In the present case, the admitted position is there was default in payment of duty. Not only there was default but the ER -1 return for the month of October gave the impression that the said amount was paid through Account Current even though such amount was never deposited in the Bank. Under the Rules, Cenvat credit as available on the last day of a particular month can only be utilized for payment of duty liability of that month. As is clear from the monthly return filed by the appellants, they did not have the balance so as to make the payment of defaulted amount. The department noticed the discrepancies and took up with them in January, 2011 itself and further replied to their letter dated 7 -2 -2011 on 15 -2 -2011. In spite of these communications and pursuations, appellants continued to default and it is only on 5 -7 -2011 that they made good for the default. In the intervening period they continued to clear the goods without making payment for each consignment and also utilizing the Cenvat credit in violation of provisions of Rule 8(3A) of the Central Excise Rules, 2002. The ld. AR further stated that the issue has been settled by the judgment of Hon'ble Madras High Court in the case of Unirols Airtex v. Assistant Commissioner of Central Excise, Coimbatore - : 2013 (296) E.L.T. 449 (Mad.). In view of the said decision, the earlier judgments of the Tribunal quoted by the ld. counsel are no longer good laws. The judgment of the Hon'ble Madras High Court is binding on the Tribunal. The ld. AR also stated that similar view is taken by the Hon'ble Karnataka High Court though at the stay stage in the case of M/s. Manjunatha Industries v. CCE, Bangalore -, 2013 -TIOL -285 -HC -KAR -CX. Ld. AR further stated that since the appellants have not cleared the goods consignment -wise even during the period Dec, 2010 to June, 2011, these clearances have been made without payment of duty and this is nothing but default in payment of duty and therefore, the second show cause notice has been correctly issued. The penalty and fine has been correctly imposed.