2007 (10) TMI 222 - AT - Central Excise

Appellants received Price Variation Bills (P.V.B) & paid differential duty - demand of duty raised u/r 8 of CER - it is clear that Rule 8 is only applicable at the time of removal of goods from factory or warehouse - in present case PVB were raised due to Price Variation Clause after removal of the goods from the factory. So Rule 8 is not applicable - allegation that appellants have wrongly utilized the credit towards payment of duty against PVB is not sustainable demand & interest set aside

Summary

Issues:
- Demand of duty under Section 11A of the Central Excise Act read with Rules 8 of the Central Excise Rules.
- Applicability of Rule 8 of the Central Excise Rules, 2002.
- Utilization of Cenvat credit towards payment of duty against Price Variation Bills (PVB).
- Imposition of penalty and interest.

Analysis:
The case involved the manufacture of Elastic Railway Clips falling under Chapter Heading No. 73 of the Schedule to the Central Excise Tariff Act, 1985. The appellants received Price Variation Bills (P.V.B) and paid the differential duty based on these bills, allegedly using part of the amount wrongly from their Cenvat Credit Account. A show cause notice was issued proposing a demand of duty under Section 11A of the Central Excise Act read with Rules 8 of the Central Excise Rules, along with the imposition of penalty. The adjudicating authority confirmed the duty demand, penalty, and interest, a decision upheld by the Commissioner (Appeals).

The advocate representing the appellants argued that Rule 8 of the Central Excise Rules, 2002, is applicable at the time of clearance of goods from the factory and not relevant to the payment of duty based on Price Variation Bills. Referring to a previous Tribunal case, it was highlighted that interest is not leviable on duty paid through supplementary invoices. The Departmental Representative contended that since the appellants availed Cenvat credit and had no balance in the account at the time of goods clearance, they could not pay duty from the Cenvat Account on Price Variation Bills.

Upon review, the Tribunal found that the demand of duty was raised under Rule 8 of the Central Excise Rules, which specifies the manner of payment of central excise duty upon goods removal from the factory or warehouse. As the appellants cleared the goods following the prescribed payment method under Rule 8, the rule was deemed applicable only at the time of removal, not after. Therefore, the allegation of wrongly utilizing Cenvat credit for duty payment against PVB was deemed unsustainable. Citing the precedent of Bharat Heavy Electricals Ltd., where duty was paid through supplementary invoices due to price re-fixing, the Tribunal concluded that the manner of payment of duty under Rule 8 was not relevant in this case. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal's decision clarified the inapplicability of Rule 8 of the Central Excise Rules to duty payment based on Price Variation Bills, ultimately leading to the setting aside of the duty demand, penalty, and interest imposed on the appellants.