2018 (12) TMI 235 - AT - Central Excise

Vires of Rule 8(3A) of Central Excise Rules, 2002 - Default in payment of duty in terms of Rule 8 of Central Excise Rules, 2002 - confirmation of demands, required to be paid in cash - imposition of penalties - Held that - The Hon ble Gujarat High Court in the case of M/s Indsur Global Ltd. vs. UOI 2014 (12) TMI 585 - GUJARAT HIGH COURT has declared the provisions of Rule 8(3A) of Central Excise Rules, 2002 as unconstitutional. The said decision of the Hon ble Gujarat High Court stands followed by the Tribunal in number of cases - Subsequently the said decision of the Hon ble Gujarat High Court in the case of Indsur Global Ltd. stands considered and followed by the Hon ble Madras High Court in the case of M/s A. R. Metallurgicals Pvt. Ltd. vs. CESTAT, Chennai 2015 (5) TMI 661 - MADRAS HIGH COURT . It is noticed that though the issue has been held in favour of the assessee by the above referred decisions of various High Courts but Revenue has challenged the Hon ble Gujarat and Madras High Court s decision by filing a Special Leave Petition against the said judgment before the Hon ble Supreme Court. The SLP stands admitted by the Hon ble Supreme Court alongwith grant of stay of proceedings - Tribunal in the case of Principal Commissioner of Central Excise, Delhi vs. Space Telelink Ltd. 2017 (3) TMI 1599 - DELHI HIGH COURT has taken note of the said development of staying the proceedings by the Hon ble Supreme Court. However it stands observed that the said submission of the Revenue is fallacious because the Hon ble Supreme Court in the case of Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association 1992 (4) TMI 183 - SUPREME COURT OF INDIA has observed that an order keeping in abeyance the judgment of a Lower Court or Authority does not deface the underlying basis of the judgment itself i.e. its reasoning. Inasmuch as the issue stands decided by various decisions, the impugned orders set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Default in payment of duty under Rule 8 of Central Excise Rules, 2002
- Constitutionality of Rule 8(3A) of Central Excise Rules, 2002
- Stay granted by the Hon'ble Supreme Court on High Court decisions
- Applicability of judgments from various High Courts

Analysis:
1. Default in Payment of Duty: The respondents defaulted in duty payment under Rule 8 of the Central Excise Rules, 2002, leading to proceedings and penalties imposed by the Revenue. However, the Commissioner (Appeals) ruled in favor of the assessee, prompting the Revenue to file appeals. The issue revolved around the debarment of Cenvat credit usage and the requirement to pay duty in cash due to the default.

2. Constitutionality of Rule 8(3A): The crux of the matter lay in the constitutionality of Rule 8(3A) of the Central Excise Rules, 2002. The Tribunal referred to the judgment of the Hon'ble Gujarat High Court in the case of M/s Indsur Global Ltd., which declared Rule 8(3A) as unconstitutional. This decision was subsequently followed by other High Courts, including Madras, Punjab & Haryana, and Allahabad High Courts, creating a precedent.

3. Stay Granted by the Supreme Court: Despite the decisions of various High Courts favoring the assessee, the Revenue challenged the Gujarat and Madras High Court decisions by filing a Special Leave Petition (SLP) before the Hon'ble Supreme Court. The Supreme Court admitted the SLP and granted a stay on the proceedings. However, the Tribunal highlighted that a stay order does not nullify the underlying reasoning of a judgment, citing the case of Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association.

4. Applicability of High Court Judgments: The Tribunal extensively discussed the applicability of various High Court judgments in similar cases. It cited instances where decisions were followed despite stays granted by the Supreme Court. Notably, the Tribunal considered the stay of the Gujarat High Court decision in the case of M/s R.K. Machine Tools Ltd. vs. Commissioner of Central Excise, Ludhiana and upheld the High Court decisions in favor of the assessee.

5. Conclusion: Based on the precedents set by multiple High Courts and the understanding that a stay does not negate the rationale of a judgment, the Tribunal found no fault in the Commissioner (Appeals)'s order. Consequently, the Revenue's appeal was deemed meritless and rejected, upholding the decision in favor of the assessee.