2020 (4) TMI 197 - AT - Central Excise

Bar on utilization of Cenvat credit - Rule 8(3A) of Central Excise Rules (CER), 2002 - denial on the ground that they had not paid the duty in time and thereby forfeited their right to use Cenvat credit - HELD THAT - A plain reading of Rule 8(3A) of CER, 2002, makes it clear that it applies to such cases where the assessee had defaulted in payment of excise duty beyond 30 days from the due date - This does not apply to the present case because in their case they have already paid as duty even before the audit whatever they declared as payable. The audit actually found that some additional amounts were payable over and above what was declared in their ER returns as duty. Rule 8(3A) does not apply to every case where the department, during the scrutiny of returns, during audit or during investigation finds any additional amount is payable as duty of excise. All such demands will be recoverable by issuing a notice under section 11A of the Central Excise Act, 1944, but they do not get covered under Rule 8(3A) of Central Excise Rules, 2002. The assessee s case is a case of demand under section 11A and is not covered by Rule 8(3A) and hence demand on this ground needs to be set aside - penalty also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Appeal against the impugned order passed by the Commissioner regarding Central Excise duty payment discrepancies and denial of Cenvat credit utilization under Rule 8(3A) of Central Excise Rules, 2002.

Detailed Analysis:

1. Background and Audit Findings:
The appellant, engaged in body building for trucks, was audited, revealing discrepancies in Central Excise duty declarations and payments for specific months. The appellant rectified the underpaid duty upon identification and paid interest. A subsequent show cause notice (SCN) sought to deny Cenvat credit utilization under Rule 8(3A) of CER, 2002, demanding the short-paid duty and additional amounts.

2. Disputed Demand and Legal Challenge:
The primary dispute revolved around the demand for Central Excise duty paid via Cenvat credit utilization. The appellant contested the applicability of Rule 8(3A) citing its invalidation by the Hon'ble High Court of Gujarat in a previous case. The appellant argued that the rule did not apply to their case as they paid the duty before the audit, and Rule 8(3A) pertains to defaults exceeding 30 days from the due date.

3. Interpretation of Rule 8(3A) and Legal Ruling:
The Tribunal analyzed Rule 8(3A) and concluded that it does not encompass cases where additional duty is identified post-assessment, as in the appellant's situation. Applying Rule 8(3A) to such cases would lead to confusion and chaos in the tax regime. Moreover, the Tribunal noted the previous ruling by the Hon'ble High Court of Gujarat declaring Rule 8(3A) ultra vires, further supporting the appellant's position.

4. Judgment and Relief Granted:
The Tribunal found the impugned order unsustainable concerning the demand under Rule 8(3A) and subsequent penalties. Consequently, the appeal was allowed, setting aside the demand and penalties imposed under Rule 8(3A) and related provisions. The Tribunal emphasized the inapplicability of Rule 8(3A) to cases like the appellant's and upheld the legal challenge based on the previous judicial rulings.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for Central Excise duty under Rule 8(3A) and penalties, highlighting the legal interpretation and precedents governing Cenvat credit utilization disputes.