2018 (4) TMI 1393 - AT - Central Excise

Utilization of CENVAT credit - Rule 8(3A) of Central excise Rules, 2002 - it was alleged that appellant have not produced GAR- 7 Challans as per the returns therefore, they mis-represented the facts to the authorities - Held that - the provisions of Rule 8(3A) of Central Excise Rules, 2002 has been declared ultra virus by the Hon ble Gujarat High Court in the case of Indsur Global Ltd. 2014 (12) TMI 585 - GUJARAT HIGH COURT - the said decision is having binding force - demand against the appellant is not sustainable. Whether the penalty can be imposed on the appellant or not? - Held that - the appellant has mis-represented the fact that the duty has been paid as per GAR-7 which was paid later on, in that circumstances, penalty u/r 27 of Central Excise Rules, 2002 is imposable therefore, a penalty of ₹ 5,000/- is imposed on the appellant. Appeal allowed in part.

Summary

Issues:
1. Non-payment of duty in time
2. Utilization of Cenvat credit and GAR-7
3. Failure to produce GAR-7 Challans
4. Imposition of penalty under Section 11AC read with Rule 25 of Central Excise Rules, 2002
5. Entitlement to utilize Cenvat account for payment of duty
6. Pre-deposit for entertaining the appeal
7. Validity of Rule 8(3A) of Central Excise Rules, 2002
8. Imposition of penalty under Rule 27 of Central Excise Rules, 2002

Detailed Analysis:

1. The appellant did not pay duty in time between September 2010 to September 2011. They utilized Cenvat credit and paid some amounts through GAR-7 but failed to produce GAR-7 Challans to the authorities, leading to allegations of misrepresentation. A show cause notice was issued proposing duty payment through PLA, demanding duty paid through Cenvat credit along with interest and penalties under Section 11AC read with Rule 25 of Central Excise Rules, 2002.

2. The Ld. AR raised an objection that since the appellant had not paid the confirmed amount, the appeal should not be entertained. However, the appellant argued that the Cenvat credit amount was debited, meeting the pre-deposit requirement under Section 35F of the Central Excise Act, 1944, making the appeal maintainable.

3. The appellant contended that Rule 8(3A) of Central Excise Rules, 2002 was declared ultra vires by the Hon'ble Gujarat High Court, citing a case precedent. The Tribunal found the decision binding and held the demands against the appellant as unsustainable, setting aside the demand confirmed in the impugned order.

4. The issue of penalty imposition arose due to the appellant's misrepresentation regarding duty payment through GAR-7. The Tribunal held that a penalty of ?5,000 was justified under Rule 27 of Central Excise Rules, 2002 for such misrepresentation, despite the duty being paid later.

5. In conclusion, the Tribunal disposed of the appeal by setting aside the demand confirmed in the impugned order based on the invalidity of Rule 8(3A) and imposed a penalty on the appellant for misrepresentation, emphasizing the importance of accurate reporting and compliance with excise rules.