ORDER
T.K. Jayaraman, Member (T)
1. This is an appeal filed by the Revenue against OIA No. 198/04 dated 13-12-04 passed by the Commissioner of Customs & Central Excise (Appeals), Hyderabad. The brief facts of the case are as follows :-
2. The appellants were paying duty on fortnightly basis in terms of relevant Central Excise Rules. The Dy. Commissioner withdrew the facility of fortnightly payments on 29-1-01 on the ground that appellants had defaulted in payment for the following fortnights :-
1. Second fortnight of September 2000
2. Second fortnight of October 2000
3. Second fortnight of November 2000
4. First fortnight of December 2000
5. Second fortnight of December 2000
3. Hence the appellants were directed to pay duty on consignment basis through their PLA. The appellants filed an appeal to the Commissioner of Central Excise (Appeals), Simultaneously, they filed a writ petition in the High Court of AP, Writ Petition was dismissed and the appellants were directed to pursue the appellate remedy. After hearing the appellants, the Commissioner (Appeals) vide OIA dated 23-4-01 upheld the order of forfeiture and rejected the appeal. The appellants again filed writ petition before the High Court of AP. The High Court in it’s order dated 24-7-01 [2001 (134) E.L.T. 344 (A.P.)l held that out of the five incidences noted by the Department, the appellants had presented cheque to the Bank on or before the due date on three occasions and had defaulted on two occasions. Therefore it was held that default on two occasions cannot lead to forfeiture of the fortnightly payments facility. Hence the OIA was quashed. In the mean while, the appellants in their letter dated 17-2-01 explained that they had presented the cheques for payment on or before the due dates on three occasions and therefore, there was no default on threes dates. As the appellants committed default of payment for the second fortnight of December 2000 and January only, they remitted the arrears of duty by debit in their Cenvat account amounting to Rs. 1,34,07,137/-. The department did not accept the payment and took a stand that Cenvat credit cannot be utilized for payment of duty in arrears and directed the appellants to pay the duty through PLA along with interest. The appellants in their letter dated 19-3-01 replied that the bar of utilization of Cenvat credit beyond the stipulated date would apply only to fortnightly debits and not to debits made towards arrears of duty. The appellants filed a refund claim on 27-12-2001 claiming refund of excess interest paid to the extent of Rs. 17,40,163/- on the following grounds.
(a) Due to illegal forfeiture order by Dy. Commissioner, the appellants could not utilize their Cenvat account resulting in mobilization of cash for PLA payments.
(b) Due to forfeiture order dated 2-2-01, they were forced to pay duty on consignment basis in the PLA and therefore, they could not pay the duty for the second fortnight on January 01 in time.
(c) Though the appellants cleared the arrears by debit in their Cenvat account, the department insisted on payment only through PLA along with interest amounting to Rs. 20,94,327/-.
(d) That the appellants were liable to pay interest only for the period from 6-1-01 to 2-2-01 which amounted to Rs. 3,54,164/-.
4. The Dy. Commissioner rejected the refund claim. Hence the appellants approached the Commissioner (Appeals). The Commissioner (Appeals) passed the impugned OIA allowing the appeal filed by the appellants and ordering grant of excess interest paid. Revenue is aggrieved over the order of the Commissioner (Appeals) on the following grounds.
The contention of the respondents that the delay of payment of duty has occurred only due to erroneous order of Deputy Commissioner is an after thought and there is nothing on record to show that the respondents would have paid the defaulted duty on 2-2-2001 on the date of serving of Deputy Commissioner’s order. The respondents have chosen to pay the duty for the second fortnights of December 2000 and January 2001 along with interest and paid accordingly. The respondent has discharged duty liability for the first fortnight of January 2001 on due date and did not pay the duty for the second fortnight of December 2000 only with an intention to pay the duty for the second fortnight of December 2000 with interest. Similarly the respondent has paid duty consignment wise for the dispatches made between 3-2-2001 to 31-3-2001 and paid the duty for the second fortnights of December 2000 and January 2001 only on 31-3-2001 along with interest. Nothing prevented form payment of duty on the due dates so as to avoid payment of interest. It is the respondent’s sweet will that they have chosen to pay the duty later along with interest. The respondents have not substantiated their case that the default of duty payment for the second fortnight of the December 2000 and second fortnight of January 2001 has resulted due to the order dated 29-1-2001 of the Deputy Commissioner. The respondent’s contention that Cenvat credit of more than 3 crores was lying unutilised as on 31st March, 2001 will not be of any help as the respondents can pay duty from the Cenvat credit available as on 31-12-2000 and 31-1-2001 for payment of duty for the second fortnights of December 2000 and January 2001. The respondents are required to pay the defaulted duty first along with interest and effect their clearances only when sufficient funds are available for payment of duty consignment wise or pay the duty later along with interest.
Commissioner (Appeals) has proceeded on the facts which are not subject-matter and not taken the above facts into consideration while allowing the appeal. Hence the Order-in-Original passed by Commissioner (Appeals) is liable to be set aside.
5. We have gone through the records of the case carefully. The appellants defaulted payment of duty for the second fortnight of December 2000 and January 2001. It is the contention of the appellant that they wanted to pay the arrears through Cenvat account. In fact, the payment was also made. However the department did not accept the same and they were forced to re-credit the amount. They received the forfeiture order on 2nd February, 2001. In view of the forfeiture order they had to pay duty consignment-wise. They could not have utilized the Cenvat also. In these circumstances, they could pay the arrears for the second fortnight of December 2000 and January 2001 only on 31st March, 2001. As a result of the above developments, they paid a total amount of interest of Rs. 20,94,327/-. They had calculated that had they been allowed to pay the arrears on 2-2-01, the interest liability would be only Rs. 3,54,164/-. It is only because of the forfeiture order of the Dy. Commissioner, they had to pay an excess interest of Rs. 17,40,163/-. The Commissioner (Appeals) in her order has made the following extract from the claim which justifies the amount claimed.
The appellants assert, had the erroneous forfeiture order not issued it would have enable them to pay the duty for the 2nd fortnight of December 2000 with interest and the duty for the 2nd fortnight of January 2001 in time. To substantiate this they furnished copies of R.T. 12 returns showing the payment of consignment-wise duty amounting to Rs. 4,75,31,124/-together with interest of Rs. 20,984,327/- thereon. Further to this they pointed out that Cenvat credit of more than three crores was lying in balance unutilized by 31st March, 2001. This amount was originally adjusted towards the arrears of duty for the said two fortnights by debiting in the RG 23A account on different dates but later on taken as credit again on payment of the whole arrears of duty in PLA at instance of the jurisdic-tional officers….
I find there is merit in the assertion of the appellants. The documents, facts and figures furnished by them axiomatically lead to irresistible and natural conclusion that the erroneous order of the Deputy Commissioner made them divert their resources for payment of consignment-wise duty in PLA without utilizing Cenvat credit on hand for a period of two months, as a direct consequence of which the duty for the said two fortnights fell into arrears creating liability for payment of interest for a period of two MORE months. To say in short again, the erroneous order finally lead to the collection of excess interest as claimed by the appellants and the erroneous order and such collection without the authority of law.
6. It is a fact that the Hon’ble High Court has held that the Dy. Commissioner’s order of forfeiture of fortnightly facility is illegal. In the circumstances of the case we are convinced that the illegal order of the Dy. Commissioner and also the refusal of the departmental authorities to accept the payment of arrears in Cenvat account resulted in the late payment of arrears and consequent interest liability. We cannot fault with the reasoning of the Commissioner (Appeals). When an assessee is forced to adopt certain ways and consequently if he is saddled with undue financial liability, then the department is clearly responsible for the same. Hence the excess amount collected on account of department’s unlawful order and direction is liable to be refunded. Hence we dismiss Revenue’s appeal and uphold the OIA.
(Pronounced in open Court on 18th Oct., 2005)