Full Judgment
2. Shri B.L. Narasimhan, learned Advocate, submitted that the Appellants manufacture Hot Rolled products of Non-alloy steel which were chargeable to duty under Section 3A of the Central Excise Act w.e.f. 1-9-97; that the Appellants opted for payment of duty on lump sum basis under Rule 96ZP(3); that the Commissioner, Central Excise, fixed their Annual Capacity of Production as 52,467 M.T. w.e.f. 1-9-97 on 31-3-98; that consequent to change in parameters the Commissioner re-fixed the Annual Capacity of Production on 16-2-1999 as 38,429.99 M.T. w.e.f. 1-9-1998; that as they did not pay duty from December, 1999 to March, 2000 they were asked by the Suptd. Central Excise to deposit the duty amounting to Rs. 23,28,128/- under letter dated 9-5-2000 and 21-7-2000; that they deposited the said duty by debiting Cenvat credit amounting to Rs. 22,58,128/- and debiting PLA by Rs. 70,000/-on 27-7-2000 and 31-3-2001 respectively; that the Commissioner, under the impugned Order has confirmed the duty holding that duty could not have been paid under Compounded Levy Scheme by debiting Cenvat credit and imposed an equal amount of penalty under Rule 96ZP(3). The learned Advocate, further, submitted that they were entitled to pay the duty on any final product out of the Cenvat credit; that the Rule does not talk about final product already manufactured or being manufactured; that further, the entire exercise is Revenue neutral inasmuch as they had during the financial year 2000-01 paid an amount of Rs. 31.65 lakhs through PLA towards duty on the final product; that had they not utilized the Credit in the Cenvat account the payment through PLA would have been reduced accordingly; that hence, there is no loss of Revenue, has submitted that no penalty is imposable under Rule 96ZP(3) as they had submitted application for revision of the Annual Capacity of Production on the basis of actual production; that in addition they were also entitled for the abatement on account of closure in terms of Section 3A(3) of the Central Excise Act.
3. Countering the arguments Shri D.N. Chaudhary, learned SDR, submitted that there is no concept of payment of compound duty by debiting Cenvat credit account; that as the Appellants had not made any payment of duty during the period December, 1999 to March, 2002 penalty is payable under Rule 96ZP(3) of the Central Excise Rules, 1944; that under this Rule the penalty shall be equal to the amount of duty outstanding from the manufacturer at the end of each month.
4. We have considered the submissions of both the sides. The facts are no in dispute that the Appellants were discharging duty liability under Rule 96ZP(3). As they had not paid the duty during the period December, 1999 to March, 2000 they were asked by the Range Supdt. to deposit the duty and in pursuance of which they had deposited the substantial amount of duty by debiting the Cenvat Credit Account and only Rs. 70,000/- were deposited through PLA. The first issue involved is whether the Appellants were eligible to deposit the amount of duty through Cenvat credit account. Though we agree with the Revenue that the amount of duty should have been deposited in cash or through PLA as the compound duty under Section 3A was not payable through Cenvat credit account, it has not been rebutted by the Revenue that they had sufficient balance in PLA at the time to make the payment of the amount of duty due from them. In view of this fact we accept the submissions of the learned Advocate that the exercise would only result in Revenue neutrality, if the party had paid duty towards compounded levy through PLA and the duty on the goods cleared by them debiting Cenvat credit account. The second issue remains regarding imposition of penalty under Rule 96ZP(3). Proviso to Sub-rule (3) of Rule 96ZP provides that where a manufacturer fails to pay the whole of amount of duty payable for any month by 10th of that month, he shall be liable to pay a penalty equal to the amount of duty outstanding from him at the end of such month or Rs. 5000/- which ever is greater. We observe that Commissioner had given a specific finding that no application for determination of duty liability under Section 3A(4) of the Central Excise Act, had ever been filed by them. The Appellants are also not challenging the demand of duty, In view of this it is established that they had not discharged the duty liability by 10th of the month as was required under Rule 96ZP. Accordingly penalty is imposable on them as the duty amounting to Rs. 22,58,128/- has been paid by them on 26-7-2000. However, taking into consideration the facts of the case we are of the view that it is net a case warranting imposition of penalty equivalent to the amount of duty. The interest of justice will be met, if the Appellants are directed to deposit a penalty of Rs. 2 lakhs. We order accordingly. The appeal is thus partly allowed.