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2018 (7) TMI 996 - AT - Central ExciseDefault in payment of duty - Demand of duty on consignment basis without utilising CENVAT Credit - Rule 8(3A) of the Central Excise Rule 2002 - whether during the defaulted period the appellant was entitled to make use of the cenvat credit for discharge of duty at the time of clearance of the goods from the factory? Held that - The provision of rule 8(3A) has been the subject matter of much litigation. The Hon ble Gujarat High Court in the case of Indsur Global Ltd. 2014 (12) TMI 585 - GUJARAT HIGH COURT has held as ultra virus the provision of Rule 8(3A) - Similar view has been expressed by the Delhi High Court in the case of Space Telelink Limited 2017 (3) TMI 1599 - DELHI HIGH COURT . The Delhi High Court has further held that even though the Gujarat High Court decision is stayed by the Apex Court in the appeal filed by Revenue this does not deface the underlying basis of the judgement itself. The Tribunal in the case of Ess Ess Kay Engg. Co. Pvt. Ltd. 2018 (1) TMI 257 - CESTAT CHANDIGARH has already taken the view that duty demands are not justified and also the penalties. Demand not justified - appeal allowed - decided in favor of appellant.
Issues:
1. Interpretation of Rule 8(3A) of Central Excise Rules, 2002 regarding the use of cenvat credit during a default period. 2. Validity of demand raised for duty on consignment basis for goods cleared during the default period. 3. Imposition of interest and penalty on the appellant. 4. Confiscation of goods and imposition of redemption fine. 5. Imposition of penalties under Rule 25 & 26 of Central Excise Rules, 2002. Issue 1: Interpretation of Rule 8(3A) of Central Excise Rules, 2002 The dispute centered around whether the appellant could utilize cenvat credit for duty payment during a default period. The lower authority held that Rule 8(3A) prohibited such use, leading to cash payment for goods cleared during the default. However, the Gujarat High Court and Delhi High Court deemed Rule 8(3A) ultra vires, allowing credit use during defaults. CESTAT Chandigarh in Ess Ess Kay Engg. Co. Pvt. Ltd. case supported this view, setting aside duty demands and penalties due to the rule's invalidity. Issue 2: Validity of Demand for Duty on Consignment Basis The Department demanded duty on consignment basis for goods cleared during the default period. The original authority dropped this demand, but the Commissioner (Appeals) upheld it in the impugned order. However, based on the Rule 8(3A) interpretation, the Tribunal set aside the demand as the appellant's use of cenvat credit during the default was deemed valid. Issue 3: Imposition of Interest and Penalty The impugned order confirmed the demand along with interest and penalty. The appellant argued against the penalty, citing the absence of Section 11AC conditions for penalty imposition under Rule 25 & 26 of the Central Excise Rules, 2002. The Tribunal agreed and set aside the penalties, emphasizing the missing elements for penalty imposition. Issue 4: Confiscation of Goods and Redemption Fine Goods were held liable for confiscation due to the Rule 8(3A) violation, despite its invalidity. However, as the goods were not available for confiscation and not cleared under bond, the Tribunal set aside the redemption fine. This decision aligned with the Shiv Kripa Ispat Pvt. Ltd. case, where redemption fine imposition was deemed inappropriate under similar circumstances. Issue 5: Imposition of Penalties under Rule 25 & 26 Penalties under Rule 25 & 26 were imposed on the appellant, but the Tribunal found them unjustified due to the absence of Section 11AC conditions. Consequently, the penalties were set aside, as the necessary elements for their imposition were not met. In conclusion, the Tribunal set aside the impugned orders, allowing the appeals based on the invalidity of Rule 8(3A) and subsequent decisions supporting the appellant's position regarding duty payment, penalties, and confiscation of goods.
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