2015 (10) TMI 1161 - AT - Central Excise

Restriction on utlization of cenvat credit for delayed payment of duty - Held that - In the present case undisputed fact is that demand of ₹ 7,17,726/- and consequent penalty of ₹ 1 lakh has confirmed on the ground that appellant have utilized Cenvat credit during the period of default inasmuch as appellant had not paid the monthly payment of duty beyond 30 days till the payment of such defaulted amount alongwith interest. As per rule 8(3A) appellant was supposed to pay duty during defaulted period from PLA i.e. through cash and not by utilizing Cenvat credit. I find that the issue has been considered by Hon ble High Court of Gujarat in the case of - Indsur Global ltd. (2014 (12) TMI 585 - GUJARAT HIGH COURT) and held that prohibition in utilizing Cenvat Credit is unconstitutional. In other words, assessee is entitle to use Cenvat Credit for payment of Excise duty at any point of time. Respectfully following ratio of above High Court judgment, I find that demand confirmed by lower appellate authority is not sustainable, therefore the same is set aside

Summary

Issues:
1. Confirmation of demand of excise duty and penalty under Rule 25 of Central Excise Rules, 2002.
2. Utilization of Cenvat credit for payment of excise duty beyond 30 days from due date.
3. Constitutionality of Rule 8(3A) of Central Excise Rules, 2002.

Analysis:
1. The appeal challenged the Order-in-Appeal upholding the demand of excise duty of Rs. 7,17,726 and imposition of a penalty under Rule 25. The appellant defaulted in monthly duty payments, paid the amount beyond 30 days with interest, leading to the demand. The Commissioner set aside the penalty equal to duty and imposed a Rs. 1 lakh penalty. The issue revolved around the utilization of Cenvat credit for duty payment post-default period.

2. The appellant's consultant cited a High Court judgment declaring Rule 8(3A) of Central Excise Rules, 2002 as unconstitutional in a similar case. The judgment stated that utilizing Cenvat credit in such situations was not sustainable. The Assistant Commissioner reiterated the impugned order's findings, upholding the demand and penalty.

3. The Tribunal analyzed the case, emphasizing that the appellant used Cenvat credit during the default period, contrary to Rule 8(3A) requiring cash payment. Citing the High Court judgment on the unconstitutionality of the rule, the Tribunal ruled in favor of the appellant. It held that the demand based on Cenvat credit utilization was unsustainable, allowing the appeal and setting aside the confirmed demand and penalty.

This detailed analysis highlights the legal arguments, the application of relevant rules, and the impact of the High Court judgment on the case, resulting in the Tribunal's decision to allow the appeal.