G.S. Singhvi, J. - (1.) WHETHER the facility available to petitioner the under the Rule 49(1) of the Central Excise Rules, 1944 (in short, the Rules) to pay central excise duty (hereinafter referred to as duty) on fortnightly -basis for removal of goods could be forfeited by the Deputy Commissioner, Central Excise, Jalandhar (respondent No. 4) on the ground of default without complying with the rule of audi alteram partem is the question which arises for determination in this petition filed for quashing of the orders dated 8 -2 -2001 and 20 -2 -2001 passed by respondent No. 1 and the Commissioner, Customs and Central Excise (Appeals) Chandigarh respectively and for issuance of a writ in the nature of mandamus directing the respondents to allow petitioner No. 1 to pay the dues by utilising CENVAT credit standing in its credit as on the date fixed for payment of duty for clearance of final product.
(2.) BEFORE adverting to the facts, we deem it proper to notice the relevant rules as amended from time to time. Prior to 1 -4 -2000, Rule 49 of the Rules provided that central excise duty shall be paid by the manufacturer on clearance of excisable goods on consignment basis either by debit to the account current i.e. by cash deposit in PLA or by debiting it to register RG -23 Part -III i.e. by utilising Modvat credit. Rules 57AB to 57 -Q contained the provisions for credit duty payable on the excisable goods used as inputs. Under these provisions, the manufacturers were entitled to take credit of the duty paid on inputs and utilised the same for paying the excise duty on final product. This was known as Modvat credit. Vide Notifications dated 31 -3 -2000 and 30 -6 -2000, Rule 49(1) was amended so as to provide for payment of duty on fortnightly -basis of removal of goods from the factory premises or from an approved place of removal. Simultaneously, Rule 57AB of the Rules was inserted so as to introduce the concept of CENVAT credit. Likewise, the existing Rule 173G was amended vide Notification Nos. 11/2000/C.E. (N.T.), dated 1 -3 -2000 (with effect from 1 -4 -2000); 34/2000 -C.E. (N.T.), dated 11 -4 -2000; 27/2000 -CE. (N.T.), dated 31 -3 -2000; 44/2000 -C.E. (N.T.), dated 30 -6 -2000 (w.e.f. 1 -7 -2000) and Notification No. 1/2001 -C.E. (N.T.), dated 11 -1 -2001. The relevant extracts of Rule 49 (1), 57AB and 173G read as under : "Rule 49. Payment of duty on fortnightly -basis on removal of goods from the factory premises or from an approved place of removal. - (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 (iii) during the second fortnight of March, in the following manner, namely: (I) the manufacturer shall pay, by the 31st day of March, a sum equal to the aggregate of - (A) the amount of duty payable on actual clearances made up to the twenty fifth day of March; and (B) an amount calculated, for the remaining six days of March, pro rata of the actual duty payable under (A), above (II) Where the payment made in the manner specified in Sub -clause (I) above - (A) is less than the actual duty liability for the second fortnight of March, the manufacturer shall pay the balance amount of duty by the twentieth day of April of that year; (B) is more than the actual duty liability for the second fortnight of March, the excess amount may be adjusted against the duty liability for the first fortnight of the month of April of that year and where such adjustment is not possible for any reason, against the duty liability for any subsequent fortnight. x x x (b) The manufacturer shall discharge his duty liability by debiting account current or utilising CENVAT credit in the following manner, namely : - (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 [in daily stock account maintained under Rule 53]; (ii) the manufacturer shall indicate on each gate pass or invoice, issued under Rule 52 or 52A, as the case may be, 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. (c) The duty of excise shall be deemed to have been paid on excisable goods for the purpose of these rules, 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 - (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 is 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 or till such date on which all the dues are paid, whichever is later] 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 failure, it will be deemed as if such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow. x x x Rule 57AB of the Rules 57AB. CENVAT credit - (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of - (i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) hereinafter referred to as the said First Schedule), leviable under the Act; (ii) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985, leviable under the Central Excise Act, 1944 in relation the goods falling under sub -heading Nos. 2401.90, 2404.99, 5402.20, 5402.32, 5402.42, 5402.43, 5402.52, 5402.62, 8515.00, 8702.10, 8703.90,8706.21 and 8706.38 of the said First Schedule; (iii) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978); (iv) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); and paid on any inputs or capital goods received in the factory on or after the first day of April, 2000. Explanation. - For removal of doubts it is clarified that the manufacturer of the final products shall be allowed CENVAT Credit Excisable duty leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) on goods falling under chapter heading No. 98.81 of the First Schedule to the said Customs Tariff Act. (b) The CENVAT credit may be utilised for payment of any duty of excise on any final products manufactured by the manufacturer for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such : Provided that while paying duty in the matter specified under Sub -rule (1) of Rule 49 or Sub -rule (1) of Rule 173G as the case may be, the CENVAT credit shall be utilised only to the extent such credit is available on the fifteenth day of the month for payment of duty relating to the first fortnight of the month and the last day of the month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by notification based on value of clearance in a financial year, for payment of duty relating to the entire month. Rule 173G of the Rules RULE 173G. Procedure to be followed by the assessee. - (1)(a) Every manufacturer, other than 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 (iii) during the second fortnight of March, in the following manner, namely : - (I) the manufacturer shall pay, by the 31st day of March, a sum equal to the aggregate of - (A) the amount of duty payable on actual clearances made up to the twenty fifth day of March; and (B) an amount calculated for the remaining six days of March pro rata of the actual duty payable under (A) above. (II) Where the payment made in the manner specified in Sub -clause (I) above : - (A) is less than the actual duty liability for the second fortnight of March, the manufacturer shall pay the balance amount of duty by the twentieth day of April of that year; (B) is more than the actual duty liability for the said second fortnight of March, the excess amount may be adjusted against the duty liability for the first fortnight of the month of April of that year and where such adjustment is not possible for any reason; against the duty liability for any subsequent fortnight. x x x (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]. (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 purposes 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 or till such date on which all the dues are paid, whichever is later 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" An analysis of the rules quoted above shows that in terms of the amended Rule 49, the manufacturer can pay excise duty on clearance of excisable goods on fortnightly -basis with a further concession of 5 days. In other words, excise duty in respect of clearance made during first fortnight of the month is payable by 20th of the said month and excise duty in respect of excisable goods during the 2nd fortnight is payable on 5th of the succeeding month. Clause (e) of Rule 49 provides for the consequences of default. It declares that if the manufacturer commits default in the payment of any one instalment beyond a period of 30 days from the date the instalment became due in a financial year or violates the requirement of full payment of instalments of third time in a financial year, whether in succession or otherwise, then he shall forfeit the facility to pay the duty in instalments under Sub -rule (1) for a period of two months starting from the date of communication of the order passed by the proper officer or till such date on which all the dues are paid, whichever is later and during the said period, he would be required to pay the excise duty for each consignment by debit to the account current and in the event of any failure, it will be presumed that the goods have been cleared without payment of duty, leading to the appropriate consequences and penalties. Rule 173G(1)(e) also provides for consequences of default similar to the one envisaged by Rule 49(1)(e).
(3.) WE may now briefly notice the facts necessary for deciding whether or not the petitioners are entitled to get relief in terms of the prayer made. Petitioner No. 1 is a public limited company engaged in the manufacture of excisable goods falling under the sub -heading Nos. 7326.90 and 8708.00 of the Tariff Schedule. Petitioner No. 2 is a share -holder and Managing Director of petitioner No. 1. For the period from 1 -4 -2000 to 30 -6 -2000, the petitioners regularly paid the duty, but in the months of July, August and September, 2000, they committed the following defaults : - ;