CX - Rule 8(3A) - Dispute relates to incorrectness of utilisation of amount from CENVAT account - order of Commissioner does not recognize payments made through CENVAT account and orders payment in cash - Appeal liable to be dismissed: CESTAT
By TIOL News Service
MUMBAI, OCT 12, 2015, THE appellants have six factories, located at among other places, in Thane and Hyderabad. The factory at Thane failed to pay a part of the duty amounting to Rs.1,92,64,263/- in the month of January 2013. Thereafter, they paid Central Excise duty in cash on each clearance after 7th of March 2013.
In the month of March 2013, the request of the appellant to get all the factories centrally registered as LTU was approved. As a result, CENVAT credit available in various factories was combined into one account. Large amount of credit available in the Hyderabad factory became available for payment of duty at Thane factory. The appellants deposited the short payment of duty of their Thane unit, that is an amount of Rs.1,92,64,293/- through their common LTU CENVAT account on 26/03/2013. They paid the interest of Rs.4,56,009/- in cash.
The revenue was of the view that the reversal of the credit made in the CENVAT account in the month of March was not a proper payment of duty and hence the default which started in January, continued.
Accordingly, a demand notice under rule 8 (3A) of CER, 2002 was issued in respect of entire clearances from 26.03.2013 to 31.12.2013. An amount of Rs.31,85,56,189/- was demanded to be paid in cash.
Incidentally, as mentioned, because of the large amount of CENVAT credit available, the appellants had utilized the same and paid the duty. However, based on the allegation contained in SCN, Revenue was of the view that the default continued and the entire duty amount was required to be paid in cash.
The said notice was confirmed by the Commissioner. This order is dated 12/03/2015.
The appellant filed an appeal before the CESTAT. However, they did not make the required pre-deposit mandated under Section 35F of the CEA, 1944 and, therefore, a notice for maintainability was issued by the Registry.
Before the CESTAT, the appellant pleaded that they have paid the entire amount from their CENVAT account and hence hundred percent of the duty demanded stands paid and in the circumstances they are not required to deposit any additional amount, i.e. amount required under Section 35F.
They rely on the CESTAT Circular F.No. 15/CESTAT/General/2013-14 issued on 28.08.2014 where it is clarified that if the mandatory deposit of the duty confirmed is made from the CENVAT account, the same can be considered as sufficient. Reliance is also placed on the decision of Tribunal in PMT Machines (M/4027/15/STB) where the tribunal had considered debit in CENVAT account as sufficient compliance for the purpose of section 35F. Decision in Indsur Global Ltd - 2014-TIOL-2115-HC-AHM-CX wherein it has been held that rule 8 (3A) of CER is unconstitutional is also adverted to.
The AR submitted that at the stage of maintainability of the appeal u/s 35F of the CEA, 1944 the merits of the case cannot be examined. He relied on the decision of Tribunal in case of CIRON Drugs and Pharmaceuticals - 2015-TIOL-1632-CESTAT-MUM to emphasize that pre-deposit was mandatory.
The Bench observed that in view of the apex Court decision in Jayaswal Neco - 2015-TIOL-176-SC the issue of payment of duty by debit to the account current and not by utilising Cenvat Credit does not appear to be settled.
Nonetheless, after distinguishing the other decisions cited by the appellant as being not applicable to the case on hand, the CESTAT observed -
"8. The circular of the CESTAT issued on 28.08.2014 practically equates the cash payment of duty with the debits made in the CENVAT Registers. The said circular will apply to normal situations where the debit through CENVAT itself is not under challenge, as it is in impugned case. The impugned order disallows the debit in CENVAT and does not recognize it as payment of duty. The crux of the issue is validity of debits made in the CENVAT account as against demand of payment in cash. The whole purpose of Section 35F is to ensure that the order issued by various authorities are complied with, at least in part, before the appeal against the same is entertained. The entire dispute in the case relates to the incorrectness of the utilisation of the amount used from CENVAT account. The order of the Commissioner clearly does not recognize the payments made through said account and orders payment in cash. In view of the fact that the Rule 8(3A) as well as the order of the Commissioner clearly distinguishing between the payment in cash with payment through CENVAT, the same can not be equated."
The Bench, therefore, held that the appeal was liable to be dismissed as non-maintainable for lack of compliance of requirement of Section 35F.
Nonetheless, in the interest of justice, the CESTAT granted four weeks time to pay 7.5% of the disputed amount and report compliance.
(See 2015-TIOL-2177-CESTAT-MUM)
