2017 (3) TMI 1599 - HC - Central Excise

CENVAT credit - Rule 8(3A) of the Central Excise Rules, 2002 - penalty - Held that - an order keeping in abeyance the judgment of a lower Court or authority does not deface the underlying basis of the judgment itself, i.e. its reasoning - the impugned order and reasoning of the CESTAT does not call for interference and the Court is not persuaded to take a view different - appeal dismissed.

Summary

Issues:
Assessment of excise duty default, application of Rule 8(3A) of Central Excise Rules, 2002, imposition of penalty, admissibility of Cenvat credit claims, constitutionality of Rule 8(3A), judicial discipline in following precedent, reasonableness of restrictions on Cenvat credit, interpretation of relevant legal judgments, impact of Supreme Court's Special Leave Petition, distinction between quashing an order and stay of operation, consistency in legal interpretation across High Courts.

Analysis:
The judgment revolves around multiple issues concerning the assessment of excise duty default and the application of Rule 8(3A) of the Central Excise Rules, 2002. The assessee had defaulted in paying excise duty within the stipulated period and sought to utilize Cenvat credit towards payment, leading to the imposition of penalties by the adjudicating authority. The Commissioner reduced penalties in some cases, considering the mandatory nature of Rule 8(3A), prompting the assessee to appeal.

The CESTAT, following the Gujarat High Court's decision in Indsur Global Ltd. v. UOI, held the claims of Cenvat credit to be admissible and set aside penalties in various appeals. The CESTAT emphasized the unconstitutionality of Rule 8(3A) based on the Gujarat High Court's ruling, leading to relief for the appellants. The judgment highlighted the importance of judicial discipline in following precedent, especially when constitutional validity is at stake.

The revenue contended that the Court is not bound by the Gujarat High Court's decision, arguing that restrictions on Cenvat credit are essential for fiscal compliance. However, the Gujarat High Court's reasoning, upheld by other High Courts, deemed the restrictions under Rule 8(3A) as arbitrary and violative of Article 14 of the Constitution, preventing the legitimate use of duty credits.

The judgment also delved into legal interpretations from previous cases, such as Eicher Motors Ltd. v. Union of India, to emphasize the indefeasible nature of Cenvat credit once validly taken. Moreover, the impact of a Supreme Court Special Leave Petition and the distinction between quashing an order and stay of operation were discussed to clarify the continued relevance of previous judgments.

Ultimately, the Court upheld the CESTAT's decision, citing consistency with the interpretations of various High Courts and rejecting the revenue's arguments against the Gujarat High Court's ruling. The judgment reinforced the importance of legal reasoning and precedent in maintaining uniformity in judicial decisions across different jurisdictions.