ORDER
Archana Wadhwa, Member (J)
1. As per facts on records, the appellants are engaged in the manufacture of P.P. Medicines classifiable under Chapter 30 of the Central Excise Tariff Act, 1985 and was availing the facility of payment of duty on monthly basis in terms of the provisions of Rule 8 of the Central Excise Rules, 2001, During the period August, November and December, 2001, the appellants defaulted on payment of duty on due date and, as such, Deputy Commissioner vide his order dated 10-2-2002 withdrew the said facility as per Rule 8 and directed the appellants to pay duly on consignment basis through PLA for a period of two months from the date of receipt of the order.
2. In terms of the above order passed by the Deputy Commissioner, the appellants cleared the goods by paying duty on consignment basis. However, instead of debiting the same through account current, they made the payment through Cenvat account. Accordingly, they were issued two show cause notices dated 16-4-2003 and 9-7-2003 proposing confirmation of demands of duty and imposition of penalty. The said show cause notices culminated into an order passed by the Assistant Commissioner confirming duties of Rs. 7,29,478/- and Rs. 7,39,000/- and imposing equivalent amount of personal penalties, along with confirmation of interest. On appeal against the above order, the appellate authority confirmed the demands of duty and recovery of interest. However, he permitted the appellants to take re-credit of Cenvat credit already debited by them from their Cenvat account. Penalty was reduced to Rs. 8,35,000/-. The said order of the appellate authority is impugned before us.
3. We have heard Shri M.H. Patil, ld. Advocate appearing for the appellants along with Ms. Aparna, Advocate and Shri S.S. Bhagat, ld. SDR for the Revenue.
4. The short point involved in the present appeal is as to whether the assessee is entitled to pay duty from Modvat or Cenvat account during the period of forfeiture of facility of payment of duty on fortnightly basis and whether he is liable to penalty. Our attention has been brought to two lines of decision by the Tribunal on the above disputed issue. The Tribunal in the case of GKW Ltd. v. CCE, BBSR-II had the occasion to examine the relevant provisions of Rule 8 as also of Rule 173G(e) and held that failure on the part of an assessee to pay duty through PLA during the forfeiture period would result in confirmation of interest against them as also imposition of penalty. The said decision was subsequently followed by the Tribunal in the case of Commissioner of Customs & Central Excise, Bhubaneshwar-II v. Durowires (P) Ltd. Subsequently in the case of Elson Packaging Industries Pvt. Ltd. v. Commissioner of Central Excise, Surat the issue was again examined with reference to the earlier decisions as also in the light of the various Board’s Circular throwing light on the expression “account current” and it was again held that debit of duty from Cenvat account instead of PLA during the forfeiture would attract penal provision. Reference was made to the Tribunal’s decision in the case of Kolhapur Steel Ltd. v. CCE, Pune-II Jayaswals Neco Ltd. v. CCE, Raipur reported in 2004 (60) RLT 403 (CESTAT-Del.) as also to the Tribunal’s decision in the case of Pioneer Alloy Casting Ltd. v. CCE, Chennai 2004 (60) RLT 558 (CESTAT-Chen.). The above declaration of law was again made by the Tribunal in the case of CCE, Indore v. Design Auto Systems Ltd. As such, the ratio of the above decisions is that interest as also penal provision would get attracted in the above circumstances.
5. As against the above, we find that the Hon’ble Bombay High Court, in the case of Lloyds Steel Industries Ltd. v. UOI has held that an assessee is entitled to utilize Cenvat credit for payment of Central Excise duty on the clearance of final product during the period of forfeiture of fortnightly payment of duty facility. The said decision was subsequently followed by Single Member Bench of the Tribunal in the case of HPL Socomac Pvt. Ltd. v. CCE, Delhi-III 2005 (70) RLT 40 (CESTAT-Del.) and by another Single Member Bench in the case of Dinesh Dyeing & Printing Works vide order No. A-839/WZB/05/C-IV dated 11-7-2005. However, we find that the said two decisions by Single Member Bench of the Tribunal were solely based upon the Bombay High Court’s judgment. On going through the decision given by the Hon’ble High Court of Bombay, we find that in para 3 of the said judgment, it has been observed as under:
para 3 “the ld. Counsel appearing for the Revenue is unable to place before us any provision to show that the petitioner is not entitled to utilise the Cenvat credit for payment of Central Excise duty on the clearance of final product
As such, it is clear from the above observation of the Hon’ble Bench that their attention not drawn to the provisions of Rule 8 of Central Excise Rules, 2002 laying down that during the period of forfeiture, an assessee shall be required to pay Central Excise duty on consignment basis by debit to the account current 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 (emphasis provided). The Tribunal in the various decisions referred in the preceding paragraphs that on account of deeming fiction created under the said rule, it has to be held that the clearances were effected without payment of duty, even though the debit of duty was made from Cenvat account. Reference was also made to the provisions of Rule 173G(e) and to the various circulars issued by the Board, as detailed in the case of Elson Packaging Industries Pvt. Ltd. As such, it can be reasonably concluded that the Hon’ble High Court’s decision in the case of Lloyds Steel Industries was by way of a concession inasmuch as the Revenue was not able to draw the attention of the Hon’ble High Court to the various provisions of the law as recorded by the Court in para 3 and as such, is sub silentio.
6. In view of the foregoing discussion, it is seen that there are two streams of views on the issue under dispute. As such, we would like to refer the matter to the Hon’ble President for constitution of Larger Bench to decide the following questions:
(i) Whether an assessee, during the period of forfeiture of facility- for payment of duty on fortnightly basis, is required to pay duty out of the PLA and whether failure on his part to do so would attract interest and penal provisions or not.
(Pronounced in Court on 23-2-2006)