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2022 (3) TMI 504 - AT - Central ExciseCENVAT Credit not utilised under the provisions of Rule 8(3A) of the Central Excise Rules 2002 - recovery of excise duty through Account Current under provisions of Section 11A of the Central Excise Act 1944 read with provisions of Rule 8(4) of the Central Excise Rules 2002 - HELD THAT - Rule 8(3A) of the Central Excise Rules 2002 in terms of which the demand has been made was considered by Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT and the said rule has been held to be ultra vires - this judgment has been subsequently followed by various High Courts and Tribunal including the jurisdictional High Court i.e. Hon ble Bombay High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS NASHIK II COMMISSIONERATE VERSUS M/S. NASHIK FORGE PVT. LTD. 2018 (9) TMI 1582 - BOMBAY HIGH COURT where it was held that The impugned order of the Tribunal has noted that Rule 8(3A) of the Central Excise Rules 2002 has been struck down as unconstitutional by the High Courts of Gujarat Madras and Punjab Haryana by various judgements. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Validity of Rule 8(3A) of the Central Excise Rules, 2002. 2. Recovery of Central Excise duty for specific periods. 3. Imposition of interest and penalty under the Central Excise Act, 1944. Issue-Wise Detailed Analysis: 1. Validity of Rule 8(3A) of the Central Excise Rules, 2002: The core issue revolves around the validity of Rule 8(3A) of the Central Excise Rules, 2002. The Tribunal noted that the Hon’ble Gujarat High Court in the case of Indsur Global Ltd. [2014 (310) ELT 833 (Guj.)] declared Rule 8(3A) to be ultra vires. The Gujarat High Court held that the condition attached by sub-rule (3A) of Rule 8 is unreasonable, violative of Article 14 of the Constitution, and amounts to a serious restriction on the petitioner’s right to carry on trade or business guaranteed under Article 19(1)(g) of the Constitution. The rule does not distinguish between willful defaulters and others, imposing harsh and unreasonable restrictions on all defaulters. This judgment was followed by various High Courts and Tribunals, including the Bombay High Court in the case of Nashik Forge Pvt. Ltd. [2019 (368) ELT 20 (Bom.)], which confirmed that proceedings based on Rule 8(3A) should be set aside as the rule had been struck down as unconstitutional. 2. Recovery of Central Excise duty for specific periods: The Additional Commissioner confirmed the demand for Central Excise duty amounting to ?71,73,677 for the period from 06.12.2008 to 16.02.2009, ?22,00,338 for the period from 17.02.2009 to 31.12.2009, and ?21,30,877 for the period from 01.01.2010 to 30.06.2010. These demands were made under the provisions of Section 11A of the Central Excise Act, 1944, read with Rule 8(4) of the Central Excise Rules, 2002, due to the appellant’s failure to observe the provisions of Rule 8(3A). However, given that Rule 8(3A) was declared ultra vires, the basis for these demands was invalidated. 3. Imposition of interest and penalty under the Central Excise Act, 1944: The Additional Commissioner ordered the recovery of interest at the appropriate rate on the Central Excise duty payable under Section 11AB of the Central Excise Act, 1944, read with Rule 8(3A) & 8(4) of the Central Excise Rules, 2002. Additionally, a penalty of ?50,48,582 was imposed under Section 11AC of the Central Excise Act, 1944, read with Rule 25 of the Central Excise Rules, 2002, for contravention of Rule 8(3A). However, the Tribunal found that the demand based on Rule 8(3A) could not be sustained since the rule had been declared ultra vires. Therefore, the imposition of interest and penalty was also invalidated. Conclusion: The Tribunal, following the precedents set by various High Courts, including the Gujarat High Court and the Bombay High Court, found no merits in the impugned order. The appeal was allowed, and the order of the Additional Commissioner was set aside. All demands, interest, and penalties based on the invalidated Rule 8(3A) were nullified.
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