2019 (5) TMI 1345 - AT - Central Excise

Vires of Rule 8(3A) of Central Excise Rules, 2002 - Bar on utilization of CENVAT Credit - HELD THAT - The decision in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT , though, admittedly, under challenge by Revenue, cannot be disregarded, where it was held that Condition contained in sub-rule (3A) of rule 8 for payment of duty without utilizing the cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion without utilizing the cenvat credit of sub-rule (3A) of rule 8 of the Central Excise Rules, 2002, shall be rendered invalid. The impugned order is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Discharge of duty liability through CENVAT credit account despite default in payment of duty under rule 8(3A) of Central Excise Rules, 2002.

Analysis:
The appeal concerns M/s Torane Ispat Udyog Pvt Ltd's duty liability discharge of &8377; 1,94,61,614/- between July 4, 2010, and November 3, 2010, using CENVAT credit account, despite a default in duty payment for May and July 2010, leading to a bar under rule 8(3A) of Central Excise Rules, 2002. The appellant's counsel argued that the disbarment provision was held ultra vires by various High Courts, making it binding until a contrary view by the Bombay High Court. The Tribunal in a previous case followed these decisions, emphasizing their binding nature due to the absence of a contrary view by the Bombay High Court.

The Authorized Representative relied on rule 8 of Central Excise Rules, 2002 and supported the original authority's findings. After considering the rival submissions, the Tribunal referred to the decision in Indsur Global Ltd, where the provision in sub-rule (3A) of Rule 8 was declared unconstitutional, limiting the application of the rule to valid aspects. The Tribunal highlighted the unreasonableness of the provision, preventing an assessee from availing CENVAT credit on duty already paid, leading to financial difficulties and violating constitutional rights. The restriction under sub-rule (3A) was deemed unreasonable, harsh, and arbitrary, violating Article 14 and hindering an assessee's right to trade or business under Article 19(1)(g) of the Constitution.

The Tribunal noted that the situation could be viewed differently, emphasizing that the liability to pay interest under sub-rule (3) of Rule 8 continues with or without sub-rule (3A). Sub-rule (3A) was seen as a mechanism for stringent recovery, not creating a new liability unless breached, and insisting on payment without utilizing CENVAT credit was considered disproportionate and arbitrary. The Tribunal highlighted the legislature's decision to replace this mechanism with a penalty for delayed duty payment. Citing the decision followed by various High Courts, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the unreasonableness and arbitrariness of the provision under sub-rule (3A) of Rule 8.

In conclusion, the Tribunal's detailed analysis focused on the unreasonableness and arbitrariness of the provision under sub-rule (3A) of Rule 8, leading to the setting aside of the impugned order and allowing the appeal based on the decisions of various High Courts.