2019 (5) TMI 143 - HC - Central Excise

Bar on utilization of CENVAT Credit - default in making payment of Central Excise Duty - constitutional validity of Rule 8 (3A) of the Central Excise Rules, 2002 - HELD THAT - The Jurisdictional High Court at Calcutta, in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS 2017 (8) TMI 1515 - CALCUTTA HIGH COURT has followed the decision of the Gujarat High Court in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT and has held the portion of rule 8 (3A) as ultra vires. There is no bar in making use of Cenvat Credit in making payment of Central Excise Duty even during default period, in view of the fact that the Rule 8 (3A) ibid which steps otherwise, has been struck down as ultra vires. The portion of the order imposing penalties as well as demand for Central Excise Duty is set aside - appeal disposed off.

Summary

Issues:
Challenging a common order under Section 35G of the Central Excise Act, 1994 regarding excise duty payment through Cenvat credit instead of PLA as per Rule 8(3) of the Central Excise Rules, 2002.

Analysis:
1. The appeals challenged a common order by the Tribunal regarding excise duty payment by utilizing Cenvat credit instead of PLA, as per Rule 8(3) of the Central Excise Rules, 2002. The appellant Revenue questioned the Tribunal's decision allowing the respondent to pay excise duty through Cenvat account during the default period, contrary to Rule 8(3) of the said Rules.

2. The respondent, a manufacturer of copper tubes and pipelines, defaulted in paying excise duty within the prescribed period, triggering Rule 8(3) of the said Rule. This rule mandates payment of excise duty at the time of removal without utilizing Cenvat credit in case of default beyond thirty days from the due date.

3. Despite the default, the respondent continued to clear goods by paying duty from its Cenvat account instead of PLA, leading to show-cause notices demanding duty for breach of Rule 8(3A) of the said Rules. The Tribunal, following a decision of the Gujarat High Court, held that the prohibition on utilizing Cenvat credit to pay excise duty was unconstitutional, thereby allowing the respondent's appeal.

4. The appellant contended that the Tribunal's order lacked reasons and highlighted that the Gujarat High Court's decision was under challenge in the Supreme Court. However, the High Court noted that once a provision is declared unconstitutional, it ceases to apply, and the decision would have all-India applicability unless proven otherwise.

5. Referring to precedents, the High Court emphasized that in the absence of a contrary view, the decision of another High Court on the constitutionality of a provision must be respected. Therefore, the Tribunal's decision to follow the Gujarat High Court's ruling was upheld, and the appeal was dismissed as it did not raise any substantial question of law.

6. Ultimately, the High Court dismissed both appeals, upholding the Tribunal's decision based on the constitutionality of Rule 8(3A) of the Central Excise Rules, 2002. No costs were awarded in the matter.