2016 (2) TMI 144 - AT - Central Excise

Reversal of credit during the defaulted period from Cenvat Account - Failure to discharge the duty liability on enrichment basis at the time of removal of goods, without utilizing the CENVAT credit - Constitutional validity of Rule 8(3A) of the Central Excise Rules 2002 - duty demand alongwith interest and to impose penalty - Held that - The short payment of ₹ 44,462.00 for the month of June 2013 is a bonafide mistake on the part of the appellant. It is noted that the appellant detected the mistake and reversed the amount alongwith interest. Thereafter, the Central Excise Officers visited the appellant s factory and directed the appellants to debit the amount of ₹ 10,09,097.00 from PLA, which was debited and re-credited by the appellant in the same month. The Adjudicating Authority observed that the appellant wrongly utilized the amount of ₹ 44,09,029.00 from the Cenvat Credit Account in contravention of Rule 8 (3A) of the Valuation Rules, 2002. The Hon ble Gujarat High Court in the case of Indsur Global Ltd. vs Union of India (2014 (12) TMI 585 - GUJARAT HIGH COURT ) held that the condition contained in Sub Rule (3A) of the Rule 8 for payment of duty without utilizing Cenvat Credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion without utilizing the Cenvat Credit of Sub Rule (3A) of Rule 8 of the said Rules 2002 shall be rendered invalid. So, the demand of amount paid by utilizing CENVAT credit during the defaulted period is not sustainable. In the present case, the entire proceeding was initiated for contravention of Rule 8 (3A) of the said Rules for payment of duty from Cenvat Account during the defaulted period. The Hon ble Gujarat High Court already struck down the portion of the Rule 8 (3A) of the said Rules, and therefore, the impugned order cannot survive. - Decided in favour of assessee

Issues:
1. Failure to discharge duty liability within stipulated period.
2. Alleged contravention of Rule 8 of Central Excise Rules, 2002.
3. Demand of Central Excise Duty and penalty imposition.
4. Utilization of CENVAT credit for duty payment.
5. Validity of demand for contravention of Rule 8 (3A) of the Rules.

Analysis:
1. The appellants failed to discharge the full duty liability for June 2013, leading to a shortfall of Rs. 44,462.00, despite having sufficient balance in their Cenvat Account. The mistake was rectified by paying the outstanding amount with interest on 05.12.2013.

2. A Show Cause Notice was issued proposing a demand of Rs. 1,14,52,029.00 along with interest and penalty for contravention of Rule 8 (3A) of the Central Excise Rules, 2002. The Adjudicating Authority confirmed the demand and appropriated the amount paid in PLA against it.

3. The Tribunal noted that the appellant's failure to reverse Cenvat credit of Rs. 44,462.00 was a genuine mistake, rectified promptly. The demand based on utilization of CENVAT credit during the defaulted period was deemed unsustainable, following a decision by the Gujarat High Court.

4. The Tribunal held that the demand for contravention of Rule 8 (3A) of the Rules, specifically related to payment from Cenvat Account during the defaulted period, was not tenable in light of the Gujarat High Court's ruling declaring a portion of the rule invalid.

5. Citing precedents where similar demands were struck down due to the invalidated portion of Rule 8 (3A), the Tribunal concluded that the impugned order could not stand. Therefore, the appeal by the appellant was allowed, and the impugned orders were set aside.

This detailed analysis of the judgment highlights the issues related to duty liability, contravention of rules, demand of Central Excise Duty, utilization of CENVAT credit, and the validity of demands in light of relevant legal precedents and court rulings.

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