2011 (10) TMI 542 - HC - Central Excise

Summary

Issues involved: Interpretation of Rule 8(3A) of Central Excise Rules, 2002 and applicability of Cenvat credit in case of default in payment of duty.

Summary:

Issue 1: The first issue revolved around the correctness of the decision of the CESTAT in setting aside the Commissioner's order based on the judgment of the Bombay High Court. The CESTAT had relied on the erstwhile Rule 49(e) and the text of sub-rule (4) of the Central Excise Rules, 2002, but the introduction of a non obstante clause through the insertion of sub-rule (3A) of Rule 8 from 1-4-2005 was not considered. The Court found that the CESTAT erred in applying the Bombay High Court judgment, as the current rule, Rule 8(3A), clearly defined the duty payment procedure for defaulting assesses. The Court set aside the CESTAT's decision and allowed the appeal in favor of the Revenue.

Issue 2: The second issue involved the applicability of Cenvat credit in the case of an assessee defaulting in payment of monthly duty instalments. The assessee, a manufacturer of M.S. Ingots, had failed to pay dues leading to a directive to pay all outstanding amounts by a specified date. The Commissioner's order found the assessee liable for duty, interest, and penalty for contravention of Rule 8 of the Central Excise Rules. The CESTAT, following the Bombay High Court decision, allowed the appeal, but the High Court held that the CESTAT's reliance on the Bombay High Court judgment was incorrect. The Court emphasized the provisions of Rule 8(3A) and the non-compliance of sub-rule (4) of Rule 3 of the Cenvat Credit Rules, ultimately ruling in favor of the Revenue and against the assessee.

Separate Judgment: The High Court, comprising D. Murugesan and K.K. Sasidharan, JJ., set aside the CESTAT's decision and allowed the civil miscellaneous appeal filed by the Revenue, answering the substantial questions of law in favor of the Revenue and against the assessee.