IMPORTANT POINTS
Manner of paying duty and mod of paying duty are two different things.
Rule 173G(e) restricting only manner of paying duty, i.e., on daily basis instead of fortnightly.
In the absence of express prohibition on payment through cenvat credit which is a valid mode of payment, such payment could not be invalidated by the Revenue.

JUDGMENT

A.K. SIKRI, J.

The issue involved in these appeals lies in a narrow compass which pertains to the demand of interest calculated on the dues of excise duty which were allegedly deposited late. The period involved is 19.12.2000 and 18.02.2001, i.e., two months. The only question is as to whether the excise duty was in fact deposited late and therefore interest would be charged. This issue has arisen under the following circumstances in Civil Appeal No. 1468 of 2004.

2. The appellant/assessee is the manufacturer of pig iron and scrap of iron on which he pays excise duty. The Central Excise Rules, at the relevant time, permitted payment of duty every fortnight instead of consignment basis. In this manner on the goods cleared in the first fortnight the duty was payable by 20th of the said month and for the goods cleared during the second fortnight the duty was payable by 5th May of the next month. The Revenue Authorities found that in the months of August, October and November 2000, the appellants had not paid the central excise duty on time. This led to the passing of an order by the Revenue suspending the facility of clearing goods of paying the duty every fortnight and interest. Instead, the appellant was directed to make the payment of duty on consignment basis for a period of two months, i.e., from 19.12.2000 to 18.02.2001.

3. After the said orders were passed the appellant started paying duties on consignment basis. During this period the appellant paid around Rs.7 crores in cash through account current, i.e., PLA. However, the appellant also had credit in their Cenvat Account. A sum of Rs. 31 lakhs (approximately) was utilized from the Cenvat Account for payment of excise duty in the aforesaid period. The authorities took the view that the appellant could not have utilized the credit from the account. The appellant was asked to pay the said sum in cash and the appellant obliged. Since this payment was made later/belatedly, the Commissioner (Excise) issued the show cause notice as to why the interest at the rate of 24% per annum should not be charged for the belated period, i.e., from 19.12.2000 to 20.05.2002. The appellant refuted the aforesaid averment in the show cause notice with the submission that the payment through Cenvat account was also a valid payment. This contention was not accepted by the Commissioner which resulted in Order-in-Original dated 13.06.2002 charging interest for delayed payment at the rate of 24% p.a. for the aforesaid period. The reason given by the Commissioner was that since the facility to pay the central excise duty in installments given to the appellant was withdrawn under sub-rule (e) of Rule 173G of the Central Excise Rules, 1944 for a period of two months, it was not open to the appellant to make use of Cenvat account during this period. As per the Commissioner, the implication of the aforesaid withdrawal of facility was to pay the excise duty for each consignment by debit to the account current, i.e., by cash only.

4. The appellant assailed the aforesaid order by filing appeal before the Customs Excise and Service Tax Appellate Tribunal (CESTAT). CESTAT has affirmed the order of the Commissioner holding that payment of duty by debiting the Cenvat Credit was not permissible during the said period of two months and therefore it would amount to non-payment of duty. As a consequence, interest was held to be payable till the date duty was actually paid through cash.

5. The moot question is as to whether it was not permissible for the appellant to utilize the Cenvat Credit during the aforesaid period of two months when facility for payment of duty fortnightly under Rule 173G was suspended. To put it otherwise, when the duty during this period was to be paid on consignment basis, it was also incumbent to pay the same in cash only and utilisation of Cenvat Credit was also forfeited during this period.

6. We have heard the learned counsel for the parties on the aforesaid issues who have ta