2015 (8) TMI 682 - HC - Central Excise

Waiver of pre deposit - delayed payment of duty - restriction on utlization of CENVAT Credit - Held that - Gujarat High Court in the case of Indsur Global Ltd. vs. Union of India, reported in 2014 (12) TMI 585 - GUJARAT HIGH COURT wherein the Gujarat High Court declared as unconstitutional the condition contained in sub-rule (3A) of Rule 8 for payment of duty without utilizing the CENVAT credit till an assessee pays the outstanding amount including interest. It is also submitted that following the said decision of the Gujarat High Court, this Court has also allowed the writ petitions filed to declare Rule 8 (3A) of Central Excise Rules, 2002 as oppressive, unreasonable and ultra vires Articles 14 and 19 of the Constitution of India, vide its order 2015 (5) TMI 603 - MADRAS HIGH COURT - assessee has made out a case for waiver of pre-deposit - Decided in favour of assessee.

Summary

Issues:
1. Whether demanding interest on defaulted amounts already paid along with interest by the Revenue amounts to double jeopardy?
2. Applicability of Sub Rule 3 A of Rule 8 of Central Excise Rules, 2002 regarding payment of duty in PLA until outstanding amount is cleared.
3. Whether defaulted amount paid using CENVAT credit is an appropriate discharge of duty and if interest is payable for amounts paid using CENVAT credit.

Analysis:
1. The appellant, a manufacturer of excisable goods, defaulted in paying excise duty net of CENVAT credit between April 2007 and October 2007, and again from January 2008 to March 2008. The Central Excise Rules state that if default persists beyond 30 days from the due date, the assessee cannot utilize CENVAT credit for paying excise duty. A show cause notice was issued demanding excise duty equal to that paid using CENVAT credit during the default period, along with interest and penalties. The Commissioner confirmed the demand, but the appellant claimed to have paid all defaulted amounts by 06.06.2008, including interest on the defaulted amount.

2. The Tribunal held that during a default, CENVAT credit used for duty payment cannot be considered an appropriate discharge of duty liability. Thus, interest on duty paid through CENVAT credit during the default period must be paid from the date of each clearance until the default ends. The appellant was directed to calculate and pre-deposit such interest along with a penalty within a specified timeline for the appeal to proceed to a final hearing. The compliance deadline was set for reporting.

3. Following a decision by the Gujarat High Court declaring a specific rule unconstitutional, the High Court found that the appellant had a case for waiver of pre-deposit. The High Court set aside the Tribunal's order on pre-deposit, remanding the matter back to the Tribunal for consideration on merits. The Court emphasized that the questions of law raised did not need immediate answers, as the Tribunal would decide based on the established cases. The appellant's appeal was allowed, and no costs were imposed.