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2016 (3) TMI 398 - AT - Central ExciseDemand of interest for delayed payment of tax - Payment of interest through CENVAT Credit - Violation of Rule 8(3A) 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 - 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 ) by the Hon ble High Court of Guajarati. 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 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 delayed payment of duty and imposition of penalty. Analysis: The case involved an appeal against an Order-in-Appeal upholding an Order-in-Original regarding a delay in paying Central Excise duty for May 2008. The appellant, engaged in manufacturing excisable goods, had paid a portion of the due amount after the deadline, leading to a demand for the remaining sum to be paid in cash as per Rule 8(3A) of the CENVAT Credit Rules, 2002. The appellant contested this, citing financial difficulties due to delayed customer payments during the 2008 global recession as the reason for the delayed duty payment. The appellant argued that the provisions of Rule 8(3A) had been declared unconstitutional by various High Courts, citing specific judgments to support this claim. They highlighted that the reliance on Rule 8(3A) for demanding duty and imposing penalties was legally untenable, as per the decisions of the Hon'ble High Courts. The appellant also contended that penalties under Rule 25 of the Central Excise Act, 2002 were not applicable for contravention of Rule 8, referencing precedents where only nominal penalties were imposed for such violations. The Tribunal, considering the legal precedents and the unconstitutional status of Rule 8(3A) as established by multiple High Court judgments, ruled in favor of the appellant. The Tribunal held that since the entire case was based on the now-invalid rule, no duty or penalty could be imposed on the appellant. Citing the judgment of the Hon'ble High Courts of Gujarat, Madras, and Punjab & Haryana, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief required. In conclusion, the Tribunal's decision was based on the unconstitutionality of Rule 8(3A) as established by various High Court judgments, leading to the reversal of the demand for duty payment and penalties imposed on the appellant. The ruling provided relief to the appellant, emphasizing the importance of legal compliance within the framework of valid and enforceable rules and regulations.
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