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2016 (2) TMI 766 - AT - Central ExciseDuty appropriated against the duty defaulted for the month of October 2007 - demand along with interest and penalty - Subrule (3A) of Rule 8 of the Central Excise Rules, 2002 - Held that - It is a fact that the show-cause notice, Order-in-Original and Order-in-Appeal are based on the violation of Rule 8(3A) of the Central Excise Rules, 2002 which require the payment of duty only through account current in case of violation of payment of duty in time as prescribed in Rule 8. As submitted by the ld. Counsel for the appellant that this Rule 8(3A) has been struck down by Hon ble High Court of Gujarat, Madras and Punjab & Haryana in various judgments cited above, no duty and penalty can be imposed as observed in the case of Shreeji Surface Coatings P. Ltd. (2014 (12) TMI 656 - GUJARAT HIGH COURT ). Since the rule under which the entire proceedings have been initiated have been declared unconstitutional, no liability arises under the said Rules. Therefore, keeping in view the law laid down by the Hon ble High Court of Gujarat, Madras and Punjab & Haryana, set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any.
Issues:
Violation of Rule 8(3A) of the Central Excise Rules, 2002 leading to non-payment of duty, imposition of penalty, validity of show-cause notice, Order-in-Original, and Order-in-Appeal. Analysis: Issue 1: Violation of Rule 8(3A) of the Central Excise Rules, 2002 and Non-Payment of Duty: The case involves the appellant, a manufacturer of plastic and automobile parts, who availed Cenvat Credit on inputs/capital goods but faced financial difficulties resulting in non-payment of the full duty liability for cleared goods during Nov. 2007 to Feb. 2008. The appellant's failure to clear the duty liability led to the issuance of a show-cause notice demanding payment and interest. The Adjudicating Authority confirmed the demand, which was subsequently upheld by the Commissioner. However, the appellant argued that the provisions of Rule 8(3A) requiring duty payment only through account current had been declared unconstitutional by several High Courts, rendering the demand unsustainable. Citing judgments like Indsur Global Ltd. and Shreeji Surface Coatings P. Ltd., the appellant contended that penalties under Rule 25 of the Central Excise Act, 2002 were unjustifiable due to the rule's invalidity. Issue 2: Imposition of Penalty and Validity of Proceedings: The appellant challenged the imposition of penalties under Rule 25, citing precedents like Saurashtra Cement Ltd. and Tejpal Paper Mills Ltd., which held that contravention of Rule 8 did not warrant penalties under Rule 25 but only a nominal penalty under Rule 27. The appellant further argued that the striking down of Rule 8(3A) by various High Courts precluded any penalties. The Tribunal's decision in Vaibhav Forge supported the appellant's position by setting aside the Commissioner's order based on similar grounds. Issue 3: Validity of Show-Cause Notice and Orders: The crux of the matter revolved around the constitutionality of Rule 8(3A) under which the show-cause notice, Order-in-Original, and Order-in-Appeal were issued. The appellant contended that since the rule had been deemed unconstitutional by the High Courts, the entire proceedings based on it were unsustainable. The Commissioner's decision was overturned, emphasizing that no liability could arise under invalidated rules, aligning with the judgments of the High Courts of Gujarat, Madras, and Punjab & Haryana. In conclusion, the Tribunal, guided by the legal precedents and the unconstitutionality of Rule 8(3A), allowed the appeal, setting aside the impugned orders and relieving the appellant from duty payment and penalties, if any. The judgment emphasized the importance of upholding constitutional principles and legal validity in excise duty matters.
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