2021 (12) TMI 178 - AT - Central Excise

CENVAT Credit - default in payment of duty beyond 30 days - failure to pay interest on defaulted amount of duty and that the appellant had utilized Cenvat credit - Rule 8(3A) of the Central Excise Rules, 2002 - HELD THAT - Evidently, as per Rules of interpretation, where a provision is inserted by way of substitution, it is deemed to have been inserted w.e.f. the date of the original statute, unless otherwise provided. Further, it is noticeable that the erstwhile Rule 8(3A) provided that in case an assessee is in default in depositing the duty for a period of more than 30 days, then the assessee shall be deemed to be in default and during such default, he shall not be entitled to utilise the Cenvat credit and shall be liable to pay duty consignment wise (i.e. on each clearance), whereas the substituted Rule 8(3A) provides that if the duty is not deposited or paid within a period of one month from the due date then the assessee shall be liable to pay a penalty @ 1% on such amount of duty not paid for each month or part thereof, during the period such failure continues. The Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT have been pleased to quash/read down the provision of erstwhile Rule 8(3A) to the extent it disabled an assessee from utilising the Cenvat credit lying to its credit, in utilising during the period of default. Accordingly, in view of the substituted provision w.e.f 11/07/14, the show cause notice is bad in law in view of the amendment in Rule 8(3A) of the Central Excise Rules 2002 w.e.f. 11/7/2014. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of penalty under Rule 25 of the Central Excise Rules, 2002.
2. Validity of show cause notice issued for contravention of Rule 8(3A) of CER, 2002.
3. Interpretation of the substituted Rule 8(3A) of the Central Excise Rules, 2002.

Analysis:
1. The appeal addressed the confirmation of a penalty amounting to ?7,85,471 under Rule 25 of the Central Excise Rules, 2002. The appellant, engaged in the manufacture of Steel Fabrication, was alleged to have defaulted in duty payment, utilized Cenvat credit, and cleared goods contravening Rule 8(3A) of the Central Excise Rules, 2002. The Adjudicating Authority confirmed the demand and penalty, which was upheld by the Commissioner (Appeals) citing precedent rulings. However, the appellant contested the penalty, leading to the Tribunal's review.

2. The appellant challenged the validity of the show cause notice issued for contravention of Rule 8(3A) of CER, 2002, arguing that the rule had been declared ultravires by various High Courts. The appellant relied on legal precedents and the principle that the Revenue must follow appellate authority's order unless suspended by a competent court. The appellant contended that the subsequent show cause notice was flawed due to the rule's invalidity post-amendment.

3. The Tribunal examined the interpretation of the substituted Rule 8(3A) of the Central Excise Rules, 2002, which was amended w.e.f. 11/7/14. The revised rule imposed a penalty for non-payment of duty within one month from the due date. The Tribunal noted that the substituted rule allowed Cenvat credit utilization during default, unlike the erstwhile rule. Citing the Hon'ble Gujarat High Court's decision, the Tribunal held that the show cause notice was invalid post-amendment, in line with various High Court rulings and the amended rule. Consequently, the impugned order was set aside, and the appeal was allowed, granting the appellant consequential benefits as per the law.

In conclusion, the Tribunal's decision revolved around the invalidity of the show cause notice post-amendment, emphasizing the importance of legal interpretations and precedents in determining the applicability of rules and penalties in Central Excise cases.