2015 (10) TMI 1542 - AT - Central Excise

Denial of CENVAT Credit - failure to discharge the full duty liability - payment of that duty through PLA along with interest - Held that - Requirement of this sub-rule to pay duty without utilizing CENVAT Credit during the period of delay in discharge of duty liability for a particular month which is beyond the period of one month from the due date is unconstitutional; and though Hon ble Madras High Court in the case of Unirols Airetx Vs. Assistant Commr. Of C. Ex. Coimbatore (2013 (12) TMI 1398 - MADRAS HIGH COURT) and Commr. Of C. Ex. Chennai-III Vs. A.R. Metallurgicals Pvt Limited (2011 (10) TMI 542 - MADRAS HIGH COURT) and Hon ble Karnatka High Court in the case of Manjunatha Industries Vs. Commissioner of C. Ex. (Appeals-I) Bangalore (2013 (4) TMI 534 - KARNATAKA HIGH COURT) have taking into the account the provisions of Rule 8 (3A) held that during the period of delay in discharge of monthly duty liability for a particular month beyond the period of one month from due date the provisions of Rule 8 (3A) become applicable and the duty on the goods cleared during this period is required to be paid without utilizing the CENVAT Credit the High Courts have not gone into the question of constitutionality of this provision. - When sub-rule 3 (A) of Rule 8 of the Central Excise Rules 2002 has been struck down as unconstitutional by two High Courts in our view Commissioner s order based on the Rule 8 (3A) would not survive. Hence the impugned order is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Duty liability for the month of April 2012.
2. Delay in discharging full duty liability.
3. Application of Rule 8 (3A) of Central Excise Rules, 2002.
4. Constitutional validity of Rule 8 (3A).
5. Penalty under Rule 25 of the Central Excise Rules.

Analysis:

1. The appellant had a duty liability for April 2012, which was not fully paid by the due date. The appellant cited a clerical mistake for the shortfall in payment, which was rectified later by paying the balance amount along with interest.

2. The delay in discharging the full duty liability beyond the due date led to the application of Rule 8 (3A) of the Central Excise Rules, 2002. This rule required the duty to be paid consignment-wise without utilizing the CENVAT Credit during the forfeiture period.

3. The Commissioner confirmed the duty demand against the appellant, directing them to pay the amount through PLA due to the application of Rule 8 (3A). Additionally, a penalty was imposed under Rule 25 of the Central Excise Rules.

4. The main contention revolved around the constitutional validity of Rule 8 (3A). The appellant argued that the requirement to pay duty without utilizing CENVAT Credit during the forfeiture period was unconstitutional, citing judgments from various High Courts.

5. The Tribunal considered the conflicting judgments but noted that two High Courts had declared Rule 8 (3A) as unconstitutional. Following this precedent, the Tribunal set aside the Commissioner's order based on Rule 8 (3A) and allowed the appeal with consequential relief.

This detailed analysis highlights the duty liability issue, the application of Rule 8 (3A), and the constitutional validity concern, leading to the Tribunal's decision to set aside the Commissioner's order.