In law most of the things are prescribed in the statute and everybody is expected to follow the rules in the prescribed manner. In Central Excise duty has to be paid at the time of removal of the goods from the factory premises and if the same is not done it entails consequences. The Central excise Rule, 2002 was amended in the year 2006 and a new rule namely rule 3 A was inserted which reads as follows:
(3A) If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rule, 2004, the assessee shall, pay excise duty for each consignment at the time of removable, 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.
So, the leverage in making payment of duty in default is available upto 30 days and thereafter if default continues then the assessee is prohibited from utilizing the CENVAT credit for making payment of duty. The net result is unless and until default is removed every consignment has to be cleared upon payment of duty in cash and the duty element cannot be paid or set-off through CENVAT.
In event of failure of making duty in cash the clearance will be deemed to be cleared without payment of duty and attracts consequences which include liability of interest and penalty.
So far as duty is concern it has to be make good along-with the interest for the default period but the penalty is to be imposed under rule 27 ( CCE vs Saurashtra Cement Ltd. 2010[260) ELT 71 Gujrat High Cort.).
Once the interest is along-with duty is paid and there is no intention evade the duty penalty is to be imposed under the general penalty rule 27 and not under Rule 25 as many a time demanded by the department. ( Solar Chemferts Pvt. Ltd. Vs Commission 2012 [276] ELT 273 Tri.).
DISPUTE AFTER 11.07.2014:
Rule 8 sub rule 3A of the Central Excise Rule, 2002 was further amended vide Notification No. 19/2014-CE dated 11.07.2014 and the new amended rule is as follows:
Rule 3A: If the assessee fails to pay the duty declared as payable by him in the return within a period of one month from the due date, then the assessee is liable to pay the penalty at the rate of one percent on such amount of the duty not paid, for each month or part thereof calculated from the due date, for the period during which such failure continues.
So, in the present time the only consequence is liability to pay penalty at the rate of 1%. The result is payment of duty for the default period can be made through the CENVAT/PLA with prescribed penalty as mentioned in the above said rule.
Prabhat Kumar, Advocate
Rajesh Kumar & Associates
Email: custom.excise@gmail.com
Web: www.rajeshkumar.co.in
CAclubindia
