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2015 (7) TMI 581 - AT - Central ExciseUtilization of wrongful CENVAT Credit - Penalty under Rule 25 read with Section 11AC - violation of the provisions of Rule 8(3A) - Held that - Appellant has not violated any of the sub-clauses (a), (b), (c) or (d) of Rule 25 (1) and, therefore, no penalty is imposable under Rule 25. It is to be mentioned that the said decision was relating to Rule 8(3) alone. Rule 8(3A) was introduced with effect from 1.6.2006 and the earlier Rule did not have any provision for clearing the goods consignment-wise and in those situations the Hon ble High Court has come to the conclusion that Rule 25 is not violated and, therefore; penalty cannot be imposed under Rule 25 and in those circumstances, even Section 11AC of the Central Excise Act is not applicable. The position has changed after the introduction of Rule 8(3A) and as in the present case, the goods were cleared without payment of duty consignment-wise and hence the ratio of the said judgment will not be applicable. Further, it is a well settled law by now that in case of taxing statute, various penal provisions are in the nature of civil obligations and do not require any mens rea or wilful intention until and unless the relevant provision provides for the same - appellant has violated Rule 8(3A) and hence the goods covered by the show cause notice are liable to confiscation and the appellant is liable to penalty under Rule 25 of the Central Excise Rules, 2002 - However, penalty is reduced - Decided partly in favour of assessee.
Issues Involved:
1. Default in monthly payment of duty and violation of Rule 8(3A) of the Central Excise Rules, 2002. 2. Legality of Rule 8(3A) as per the judgment of the Hon'ble High Court of Gujarat. 3. Imposition of penalty under Rule 25 read with Section 11AC of the Central Excise Act. Detailed Analysis: 1. Default in Monthly Payment of Duty and Violation of Rule 8(3A): The appellant defaulted in the monthly payment of duty for October, November, and December 2010. Rule 8(3A) of the Central Excise Rules, 2002 mandates that if an assessee defaults in payment of duty beyond thirty days from the due date, they must pay excise duty for each consignment at the time of removal without utilizing the CENVAT credit. The appellant continued to clear goods without adhering to this provision from 6.12.2010 to 14.12.2010, 6.1.2011 to 7.1.2011, and 6.2.2011 to 23.2.2011, thus violating Rule 8(3A). Consequently, a show cause notice was issued for the payment of Rs. 7,16,391/- along with interest and penalty under Rule 25 read with Section 11AC. The original authority confirmed the demand, interest, and penalty, which was later reduced by the first appellate authority to Rs. 3,00,000/-. 2. Legality of Rule 8(3A) as per the Judgment of the Hon'ble High Court of Gujarat: The appellant argued that the Hon'ble High Court of Gujarat in *Indsur Global Ltd. vs. UOI* and *Precision Fasteners Ltd. vs. CCE* held Rule 8(3A) as arbitrary and unreasonable, violating Articles 14 and 19(1)(g) of the Constitution. The court declared the restriction on utilizing CENVAT credit as unconstitutional. However, the respondent contended that the judgment only invalidated the restriction on utilizing CENVAT credit, not the entire Rule 8(3A). The Tribunal noted that the Gujarat High Court found the restriction on utilizing CENVAT credit unreasonable and unconstitutional but upheld other provisions of Rule 8(3A), which require the payment of duty for each consignment at the time of removal until the outstanding amount is paid. The appellant failed to pay duty consignment-wise, thus violating Rule 8(3A). 3. Imposition of Penalty under Rule 25 Read with Section 11AC: The appellant contended that no penalty could be imposed under Rule 25 read with Section 11AC, citing the *CCE vs. Saurashtra Cement Ltd.* case, where the Gujarat High Court ruled that penalty under Rule 25 was not applicable as none of the sub-clauses (a), (b), (c), or (d) were invokable. However, the respondent argued that the facts of the present case differed as it involved Rule 8(3A), which mandates consignment-wise duty payment. The Tribunal held that the appellant violated Rule 8(3A), making the goods liable for confiscation and the appellant liable for penalty under Rule 25(1)(a). The Tribunal reduced the penalty from Rs. 3,00,000/- to Rs. 50,000/- considering the duty involved and the number of days of violation. Conclusion: The Tribunal concluded that the appellant violated Rule 8(3A) by not paying duty consignment-wise, making the goods liable for confiscation and the appellant liable for penalty under Rule 25. The penalty was reduced to Rs. 50,000/-. The demand for duty did not survive as the amount was later paid through credit/cash, aligning with the Gujarat High Court's decision in *Indsur Global Ltd.* The appeal was disposed of accordingly.
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