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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1468 OF 2004

M/S JAYASWAL NECO LTD. .....APPELLANT(S)

VERSUS

COMMISSIONER OF CENTRAL EXCISE, RAIPUR

.....RESPONDENT(S)

WITH

CIVIL APPEAL NO. 7386 OF 2005

J U D G M E N T

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.

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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  20 th 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

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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

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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  taken  us  through  the  relevant

provisions   contained  in  Central  Excise  Act  as  well  as  Rules.

Section  11A of  the  Act  permits  the  Central  Excise  Officer  to

recover duty not levied or not paid or short levied or short paid or

erroneously refunded.  It can be done within one year from the

relevant  date  by  serving  show  cause  notice   on  the  person

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chargeable with the duty.  It is not necessary to state in detail the

procedure prescribed therein.  For our purposes it is sufficient to

mention  that  Section  11AA of  the  Act  provides  that  where  a

person chargeable with duty determined under Section 11A fails

to  pay  such  duty  within  three  months  from  the  date  of  such

determination, he is liable to pay interest on the delayed period

which is at the rate not below 18% and not exceeding 36% p.a.

as  for  the  time  being  fixed  by  the  Central  Government  by

Notification in the Official Gazette.

7. Chapter  III  of  the  Rules  deals  with  'Levy  and  Refund  of,  and

Exemption from Duty'. Rule 9 thereof stipulates time and manner

of payment of duty and sub-rule 1 thereof reads as under:  

“Rule  9:  Time  and  manner  of  payment  of Duty:-(1) No excisable goods shall be removed from any place where they are produced, cured, manufactured  or  any  premises  appurtenant thereto,  which  may  be  specified  by (Commissioner)  in  this  behalf,  whether  for consumption, export or manufacture of any other commodity in or outside such place, until (excise duty  leviable  thereon  is  determined  and indicated on each application in the proper form or  each  gate  pass,  as  the  case  may  be, presented to the proper officer at such place and in such manner as is prescribed in these rules or as the Commissioner may require.”

8. The next Rule relevant for our purpose is Rule 173G which is

textually very long dealing with various aspects.  It prescribes the

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procedure  that  has  to  be  followed  by  the  assessee  for  the

purpose of discharging his duty/liability in respect of clearances of

excisable  goods  from the  place  of  permission  specified  under

Rule 9 or from a store room or other place, storage approved by

the Commissioner under Rule 47.

9. Eschewing the portion which is not relevant for us, we reproduce

that part of the Rule which is concerned with this case, reads as

under:  

“Rule 173G. Procedure to be followed by the assessee.-[(1)(a)  Every  manufacturer,  other than  a  manufacturer  who  is  availing  of  the exemption under a notification based on value of clearances  in  a  financial  year,  shall  discharge his  duty  liability  in  respect  of  clearances  of excisable  goods  from  the  place  or  premises specified under rule 9 or from a store room or other  place  of  storage  approved  by  the Commissioner under rule 47 made: (i)  during the first fortnight of the month, by the twentieth day of that month; (ii)   during  the  second fortnight  of  the  month, other than the month of March, by the fifth day of the succeeding month; and

xx xx xx (b)  The manufacturer shall maintain an account current  with  the  Commissioner  and  shall discharge  his  duty  liability  by  debiting  such account current or by utilising CENVAT credit, in the following manner: (I)  the manufacturer shall assess the duty due on the excisable goods intended to be removed, for  each  consignment  and  shall  enter  the particulars  of  such  consignments  [amount  of duty  payable  had been substituted,  the  words and figures in Daily  Stock Account  maintained under Rule 53];

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(ii)   the  manufacturer  shall  indicate  on  each invoice,  issued under rule 52A,  the amount  of duty payable. (iii)   at  the  end  of  each  fortnight,  the manufacturer shall determine the total amount of excise  duty  payable  on  the  excisable  goods removed  during  the  fortnight,  and  he  shall discharge the total  duty liability  so payable by making debit entry in the account current or by utilising CENVAT credit, as the case may be. (c)  the duty of excise shall be deemed to have been  paid  for  the  purpose  of  these  rules,  on excisable  goods  removed  in  the  manner prescribed  in  this  sub-rule,  and  the  credit  of such duty, as may be prescribed, under any rule, will be permissible. (d)  If the manufacturer fails to pay the amount of  duty  payable  by  the  due date,  he  shall  be liable to pay the outstanding amount along with interest at the rate of twenty four per cent per annum  on  the  outstanding  amount,  for  the period starting with the first day after due date till the date of  actual  payment  of  the outstanding amount. (e)  If the manufacturer defaults on account of any of the following reasons, namely:- (i)   full  payment  of  any  one  instalment  is discharged beyond a period of thirty days from the date on which the instalment was due in a financial year, or  (ii)   the  due  date  on  which  full  payment  of instalments are to be made is violated for the third  time  in  a  financial  year,  whether  in succession or otherwise, then the manufacturer shall forfeit the facility to pay the dues in instalments under this sub-rule for  a  period  of  two  months,  starting  from the date of  communication of  an order passed by the proper officer in this regard and during this period the manufacturer shall be required to pay excise duty for each consignment by debit to the account current referred to in clause (b) and in the event of any such failure it will be deemed as  if  such  goods  have  been  cleared  without payment  of  duty  and  the  consequences  and penalties  as  provided  in  the  Central  Excise

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Rules shall follow.”

10. Clause (a) of sub-rule (1) permits the fortnight payments of

excise  duty.   Clause  (b)  mandates  maintaining  of  a  current

account  with  the  Commissioner  and  states  that  duty  can  be

discharged by debiting such current account or by utilizing Cenvat

Credit.  As per clause (c) once the duty is paid  in the prescribed

manner i.e. as per sub-rule (b) it would amount to discharging the

liability of payment of excise duty.  On failure to pay the duty by

the due date interest at the rate of 24% p.a. can be charged on

the delayed payment.  Sub-rule (e) deals with the situation where

the manufacturer commits default on account of payment of duty

for  the  reasons  mentioned  therein  and  in  such  a  case  the

authorities can forfeit the facility to pay the dues in installments

under these sub-rule for a period of two months.

11. In  the present case, no doubt, this facility was withdrawn under

Rule 173G(1)(e).  The effect of withdrawal of this facility would be

that  the  appellant  was  not  permitted  to  pay  the  duty  every

fortnight as per clause (a) of sub-rule (1). Instead the appellant

was required to pay the duty for each consignment.

12. It  is  not  in  dispute  that  the  appellant  paid  the  duty  on

clearing each consignment.  Substantial portion of the duty, i.e.,

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to the tune of Rs.7 crores was paid in account current through

PLA.  However, for payment of small portion of a duty which was

in the neighbourhood of Rs.31 lakhs, the appellant utilised Cenvat

Credit Account.  It is this payment from Cenvat Credit which has

become the bone of contention.  The respondent communicated

to the appellant that duty through Cenvat during this period, when

facility  under  Rule  173G  was  withdrawn,  is  not  permissible.

Without demur, the appellant  complied with the demand of the

respondent by paying this portion of duty also through account

current.  However, this happened in May, 2002.  The respondent

now took the position that the custom duty of Rs.31 lakhs was

paid belatedly. As it was paid only in May, 2002, on this delayed

payment, appellant was liable to pay interest @ 24% p.a. from the

period from 19.12.2000 to 20.05.2002.  Order-in-Original  dated

13.06.2002 passed by the Commissioner affirming the demand in

show cause notice  has  been confirmed by  the  Tribunal.   The

reason  given  by  the  Tribunal  is  that  it  was  admitted  by  the

appellant that facility of payment of duty by installments had been

withdrawn for two months.  It was also admitted by the appellant

that during this period, the appellant discharged a portion of duty

through Cenvat Credit Account but afterwards paid this amount of

duty  in  cash  and,  therefore,  admitted  that  payment  of  duty

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through Cenvat  Credit  Account  was  not  permissible  under  the

provisions  of  sub-rule  (e)  of  Rule  173G(1)  of  the  Rules.

According to the Tribunal, since these were the admitted facts,

the interest @24% p.a. which is prescribed for late payment, was

rightly claimed by the Department.

13. At the outset, we are compelled to remark that the Tribunal

was not correct in observing that merely because the appellant

paid the aforesaid portion of duty subsequently in cash, it  had

accepted the legal position that payment of duty through Cenvat

Credit Account was not permissible under the provisions of Rule

173G(1)(e) of the Rules.  Whether such a course of action was

permissible or not had to be examined in the light of the legal

provisions.  There is no estoppel against law.  Merely because

the appellant had yielded to the demand of the Revenue to pay

that  portion  of  duty  also  in  cash,  would  not  mean  that  the

appellant was precluded from taking a stand that such mode of

payment through Cenvat Credit Account even during the period

when  facility  of  payment  of  duty  by  instalments  had  been

withdrawn  for  two  months,  was  permissible.   It  had  taken  a

specific defence in this behalf  and, therefore,  the Tribunal was

required to examine the matter in the light of the aforesaid Rule.

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We have already extracted relevant portion of Rule 173G.  Since,

we are specifically concerned with sub-rule (e) thereof, for clarity

and better understanding of the matter, we reproduce the same

once again:

“Section 173G(1)

xx xx xx

(e)  If the manufacturer defaults on account of any of the following reasons, namely:-

(i)   full  payment  of  any  one  instalment  is discharged beyond a period of thirty days from the date on which the instalment was due in a financial year, or  

(ii)   the  due  date  on  which  full  payment  of instalments are to be made is violated for the third  time  in  a  financial  year,  whether  in succession or otherwise,

then the manufacturer shall forfeit the facility to pay the dues in instalments under this sub-rule for  a  period  of  two  months,  starting  from the date of  communication of  an order passed by the proper officer in this regard and during this period the manufacturer shall be required to pay excise duty for each consignment by debit to the account current referred to in clause (b) and in the event of any such failure it will be deemed as  if  such  goods  have  been  cleared  without payment  of  duty  and  the  consequences  and penalties  as  provided  in  the  Central  Excise Rules shall follow.

(emphasis supplied)”

14. As  already  mentioned  above,  this  clause  enables  the

authorities to forfeit the facility to pay the dues in instalments for a

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period of two months in case the assessee commits default of the

nature specified therein.  Thus, the main purport of this Rule is to

withdraw the facility of payment of dues in instalments and calling

upon the assessee to pay the duty during the aforesaid period on

clearing  each  consignment,  i.e.,  on  everyday  basis.   In  this

context, the question that arises is as to whether such a duty has

to be necessarily paid only by debit to the account current or it

can be paid through Cenvat Credit as well.   

15. For answering this question, first thing that is necessarily to

be pointed out is the purport behind Rule 49 and Rule 173G of

the Rules. Rule 49 enables the assessee to pay excise duty on

fortnightly basis on removal of goods from the factory premises or

from an approved place of removal but for this Rule the assessee

is required to pay duty on removal of each consignment, i.e. on

consignment to consignment basis. That is what is provided in

Rule 9 of the Rules which mandates that no excisable goods shall

be removed from the place where they are produced, cured or

manufactured or any premises pertained thereto, which may be

specified  by  the  Commissioner  in  this  behalf,  whether  for

consumption, export or manufacture of any other commodity in or

outside  such  place,  until  excise  duty  leviable  thereon  is

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determined and indicated on each application in the proper form

or each gate pass, as the case may be, presented to the proper

officer at such place and in such manner, as may be prescribed in

these Rules or as the Commissioner may require.  However, Rule

49 gives facility to the assessees to remove the goods without

paying the duty immediately but allowing it to pay it on fortnightly

basis as provided therein.  At the same time, this facility is given

to  the manufacturer/assessee on the premise that  he faithfully

pays  the  duty  every  fortnight,  by  specified  dates  which  are

stipulated in Rule 173G.  In case defaults are committed by the

assessee, its consequences are also provided in the said Rule.

For certain specified nature of defaults mentioned in Clause (e) of

Rule  173G(1),  this  facility  to  pay  the  dues  in  instalments  on

fortnightly basis is to be forfeited for a period of two months.   

16. What  follows from the aforesaid scheme discernible from

the combined reading of Rules 9, 49 and 173G(1) is that focus of

these Rules is on the manner in which duty is to be paid, namely,

on daily basis or on fortnightly basis. The mode of payment of

duty is altogether different aspect.

17. In  sub-para  (b)  of  Rule  173G,  a  duty  has  been  cast  on  the

manufacturer  to  maintain  an  account  current  with  the

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Commissioner for the purpose of discharging his duty liability by

debiting such account current.  This sub-rule also provides that

duty can be discharged by utilising Cenvat Credit in the manner

mentioned  in  the  said  sub-rule.   Thus,  insofar  as  mode  of

payment is concerned, it can be through account current or by

utilising Cenvat Credit.  Both the methods are permissible.  The

mode of payment of duty through Cenvat Credit is as good as

making  payment  through  account  current.   This  Court  in

Commissioner of Central  Excise, Pune  v.  Dai Ichi Karkaria

Limited1 described credit  under the Modvat scheme to be “as

good as tax paid”.  The reasons for the aforesaid view taken by

the Court are contained in paras 17 and 18 of the judgment which

may be recapitulated as under:

“17.   It  is  clear  from these Rules,  as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him  in  the  production  of  an  excisable  product immediately  it  makes  the  requisite  declaration and obtains  an acknowledgment  thereof.   It  is entitled to use the credit  at any time thereafter when  making  payment  of  excise  duty  on  the excisable product.  There is no provision in the Rules which provides for a reversal of the credit by  the  excise  authorities  except  where  it  has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for.  We are here really concerned with credit that has  been  validly  taken,  and  its  benefit  is available  to  the  manufacturer  without  any

1

1999 (112) ELT 353 (SC)

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limitation  in  time  or  otherwise  unless  the manufacturer itself  chooses not to use the raw material in its excisable product.  The credit is, therefore, indefeasible.  It should also be noted that  there is  no co-relation of  the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of  the particular raw material to which the credit is related.  The credit may be taken against the excise duty on a final product manufactured on the very day that  it  becomes available.

18.   It  is,  therefore,  that  in  the case of  Eicher Motors Ltd. v. Union of India [1999 (106) E.L.T. 3] this  Court  said  that  a  credit  under  the Modvat scheme was “as good as tax paid.”

18. When we understand the character of Cenvat Credit in the

aforesaid  manner,  the  answer  to  the  question  posed  easily

becomes  available,  namely,  even  during  the  period  when  the

facility  of  payment  of  excise  duty  in  instalments  on  fortnightly

basis is not available and remains suspended for a period of two

years, the only obligation for the assessee is to pay the duty on

each clearance and not on deferred basis.  At  the same time,

insofar as manner of duty is concerned, it can be either through

account current or Cenvat Credit.

19. We  are  conscious  of  the  words  “during  this  period  the

manufacturer  shall  be  required  to  pay  excise  duty  for  each

consignment by debit to the account current referred to in Clause

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(b) …...” occurring in clause (e). It is on the basis of this language

used in Clause (e) of Rule 173G(1), the argument of the learned

senior counsel for the Revenue is that the only mode or manner

of  payment  of  duty  during  this  period  was  through  account

current.  However, it is not possible to agree with this contention

in  the  absence  of  specific  prohibition  contained  in  the  said

sub-rule (e) in this behalf coupled with the fact that the payment

of  excise duty  through Cenvat  Credit  is  recognised as a  valid

mode  of  payment.   In  fact,  as  would  be  noticed  below,  the

Department  itself  understood  the  scope  and  purport  of  the

aforesaid provision in this very manner, as it existed at that time.

20. In this behalf, it also required to emphasize that the Central

Government introduced a scheme namely MODVAT Scheme in

the  Central  Excise  Law as  introduced  by  a  separate  Chapter

containing Rule 57A to 57(U) from 1986.  As per the MODVAT

credit  scheme  introduced  by  the  aforesaid  Rules,  the

manufacture of certain final products which are excisable goods

specified in the notification issued by the Government, is allowed

credit of any duty to excise paid by him on the input which is used

in the manufacture of the final product.  The credit of specified

duty  allowed is  to  be utilised towards  payment  of  duty  excise

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allowable on the final product whether under the Act or under any

other  Act  as  the  case  may  be  by  the  notification  issued  and

subject to such conditions as may be specified.  As per Rule 57F,

the inputs on which credits have been taken may be used in or in

relation to the manufacture of final products and the inputs may

be removed for home consumption or for export under bond.  As

per this rule,  all  the removals of  inputs for  home consumption

shall be made on payment of duty equal to the amount of credit

availed in respect of such inputs and under the cover of invoice

prescribed under Rule 52A.  The inputs can also be removed as

such  or  after  they  have  been  partially  processed  by  the

manufacturer of the final products to a place outside the factory

under the cover of a challan specified in that behalf by the Central

Board of Excise and Customs, for the purpose of test, repair etc.

carrying  out  any  operation  necessary  for  manufacture  of  final

products and return the same to his factory within the specified

period.  The inputs on which credit has been taken may be used

for  the manufacture  of  final  products  or  can be removed after

payment of duty for home consumption.  Rule 57-I provides for

recovery of  credit  wrongly availed of  or  utilised in  an irregular

manner.  It provides for recovery of the duty credit of which was

wrongly availed and if the manufacturer has taken the credit by

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reason of fraud or willful misrepresentation, suppression of facts

etc. with the intention to evade payment of duty then he shall,

apart from his liability to pay the amount equivalent to the credit,

be liable to pay penalty equal to the same amount plus interest

under Section 11AA.

21. The Scheme is thus, a self-contained one, dealing with its

applicability,  eligibility  of  credit  of  duty  on  certain  inputs,

adjustment  to  be  made  on  the  credit  of  inputs  used  in  final

products, manner of utilisation of inputs, procedure to be followed

by the manufacturer, procedure to be followed by the persons

who have availed credit issued in invoice and finally provision for

recovery of credits wrongly availed and a provision for imposing

penalty for violation of the provisions and availing wrong credit.

With the introduction of this new scheme, the assessee had the

option to pay excise duty by availing credit of the duty paid on

inputs  provided  he  is  a  manufacturer  of  the  finished  products

making use of such inputs.

22. This provision came up for interpretation before at least four High

Courts and all  these Courts took the view that even when the

facility is withdrawn for making payment in instalments, the excise

duty can be paid through Cenvat Credit.  It is not necessary to

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refer to all these judgments. Suffice it is to make a mention of the

decision  dated  26.10.2005  in  C.E.Appeal  No.  22  of  2005

rendered by Kerala High Court in Thanikkudam Bagawati Mills

Limited,  Thanikkudam  v.  The  Commissioner  of  Central

Excise, Calicut.  In this judgment, the High Court after analysing

the Rules as well as the provisions of Modvat scheme summed

up the position as under:

“23.  It is true that as per rule 173G(1)(b) also the payment  utilising Cenvat  credit  is  an approved manner of payment of duty by these rules.  It is equally true that even in the absence of such a provision contained in Rule 173G(1)(b) accepting the mode of payment utilising Cenvat credit, an assessee,  even  by  virtue  of  the  provisions contained under Rule 49 read with Rule 57A, will be entitled to utilise such input credit.  In other words,  there  is  force  in  the  contention  of  the assessee  that  Rule  173G  does  not  give  any benefit of any input credit and merely by referring to  the  entitlement  of  the  assessee  to  use  the Cenvat credit again under Rule 173G and further providing that the assessee has to pay the duty during  the  suspended  period  for  each consignment by debit  from the account current only in no way will have the effect of taking away the already conferred benefit  by  separate rule. So long as no amendment is brought out to Rule 49  or  Rule  57A,  as  the  case  may  be,  the consequences  of  making  an  assessee  a defaulter and to deny him the benefit of utilising the  input  credit  will  become  unworkable  and ineffective.  It has to be noticed as rightly pointed by the counsel appearing for the petitioner that the  rule  making  authority  took  notice  of  this lacuna and by the Central Excise Rules, 2002 – second amendment 2005, which came into force from 1st  April,  2005,  the  Central  Excise Rules 2002 was amended and Rule 3A was inserted

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which reads as follows: “If  the  assessee  defaults  in  payment  of

duty by the date prescribed in sub-rule (2) and the same is discharged beyond a period of thirty days from the said date, then the assessee shall forfeit  the  facility  to  pay  the  duty  in  monthly instalments under sub-rule (1) for a period of two months, starting from the date of communication of  the  order  passed  by  the  Assistant Commissioner of  Central  Excise or  the Deputy Commissioner  of  Central  Excise,  as  the  case may be, in this regard or till such date on which all  dues  including  interest  thereof  are  paid, whichever  is  later,  and  during  this  period notwithstanding  anything  contained  in  sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall be required to pay excise duty for each  consignment  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.”

24.  It is for the first time that a non obstantive clause was added so as to take away the benefit under the Cenvat Credit rules and to utilise the input  credit  during  the  operation  of  the suspended  period  and  requiring  any  duty  by debit to the account current only.  Until then, as is already referred to above, merely because rule 173G recognises  the  payment  of  duty  utilising the Cenvat credit also and providing for payment of duty through open and current account only during the  suspended period  will  not  have the effect of taking away the benefit conferred by a separate rule since even without Rule 173G by virtue of Rule 49 read with Rule 57A a right has already conferred on the assessee to utilise the input  credit  for  payment  of  duty at  the time of discharging his liability  to pay duty on the final product as provided for in the rules.”

23. Not only we are in agreement with the aforesaid view taken by

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the  High  Courts,  it  is  imperative  to  point  out  that  even  the

Department accepted the aforesaid opinion of the High Courts.

For this reason, judgments rendered by the High Courts were not

challenged and instead to remedy the situation,  Rule 8 of  the

Central Excise Rules, 2002 itself is amended by inserting sub-rule

3A vide Notification No.17/05-C.E. (N.T.) dated 31.03.2005 w.e.f.

01.04.2005.  This Rule now specifically provides that in case of

default in making payment of duty, the assessee shall be required

to pay excise duty for each consignment by debit to the account

current  and  not  by  utilising  Cenvat  Credit.  This  also  lends

credence  to  our  view  which  we  have  taken  in  respect  of

unamended provision that was applicable at the relevant time.

24. The result  of  the aforesaid  discussion would  be  to  allow

these appeals and set aside the decision of the CESTAT.  We

order accordingly.

.............................................J. (A.K. SIKRI)

.............................................J. (N.V. RAMANA)

NEW DELHI; AUGUST 06, 2015.

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