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2022 (7) TMI 765 - AT - Central ExciseDefault in payment of Central Excise Duty - contravention of Rule 8(3A) of Central Excise Rules, 2002 or not - Whether the payment of Rs 5,00,000/- by the appellants on 26.03.2013, from their CENVAT account, can be considered as payment of the defaulted duty for the month of February, 2013 as per Rule 8 of the Central Excise Rules, 2002? - Whether the rigors of Rule 8 (3A) shall apply to the clearances made by the appellant after that date and demand of Rs 4,13,14,846/- for the clearance made during the period 26.03.2013 to 28.02.2014 could have been made by the revenue by invoking provisions of Section 11A of the Central Excise Act, 1944? - HELD THAT - In view of the clarification vide Circular No.962/05/2012-CX, dated the 28th March, 2012 issued by the Board there seem to be no requirement, that the arrears that have arisen under Rule 8 were required to be paid in cash only, utilization of the CENVAT Credit for payment of the said arrears is permissible, subject to the condition that the balance was available in the account of the appellant. In view of the decision of Hon ble Gujarat High Court in ADVANCE SURFACTANTS INDIA LTD VERSUS UNION OF INDIA 2017 (8) TMI 594 - GUJARAT HIGH COURT where it was held that proviso to Sub-Rule (4) of Rule 3 of the Cenvat Credit Rules, which disentitles the manufacturer utlization of Cenvat Credit availed in a particular month for the goods manufactured in the preceding month can be said to be contrary to the law laid down by the Hon ble Supreme Court in the aforesaid decisions as well as contrary to the CENVAT Credit Scheme, and therefore, the same is invalid and unconstitutional and the clarification issued by the Board there seem to be nothing wrong in the appellants discharging the defaulted duty liability as per Rule 8 from their CENVAT account. It is quite evident that the revenue authorities took nearly one year to give consent to the appellant to operate as an LTU. In the meantime as per the show cause notice certain defaults in term of Rule 8, were noticed in the payment of Central Excise duty by the due date for the Month of February 2013 - Rule 12 A (4) of the CENVAT Credit Rules permitted the transfer of CENVAT Credit from unit of the person operating under the LTU scheme to the other unit of the same person. Appellant Plant-IX, was having sufficient credit balance of Rs in their CENVAT Account at the close of the February 2013. If they the appellant request to operate under the LTU scheme was allowed during any month prior to the month in which default occurred, they would have transferred this balance to their Plant -VII and would have utilized the same for payment of the duty. Thus, there are no justification in holding that the payment of amount of Rs 5,00,000/- from their CENVAT account (subject to verification of the transfer made on 26.03.2013) was not enough to discharge the duty arrears for the month of February-2013 in terms of Rule 8 of the Central Excise Rules, 2013. Plain reading of Rule 8 (3A) as it was then would clearly show that it is not amenable to Section 11A of the Central Excise Act, 1944. Rule itself declares that in cases where the rule apply, the clearances are to be made on payment of duty in cash and on consignment basis. In case of default from the same the goods will be treated to be cleared without payment of duty and consequences as per law will follow. By making the demand as above nearly one year later, for the clearances made without payment of duty revenue was not only soft pedaling the issue but was permitting the clearance without payment of duty. The natural consequence of the clearances made without payment of duty was to seize and confiscate all the goods that were cleared by the appellant without payment of duty. Might be revenue mulled over the issue during the intervening period as to what would be correct course of action. After permitting the clearances contrary to provisions of Rule 8 (3A) revenue authorities cannot subsequently turn back and make demand by invoking the provisions of Section 11A. Undisputedly appellants have paid the defaulted duty for the month of February 2013, by making a debit entry in the CENVAT Account on 26.03.2013. Even if this debit was to be considered as not a valid payment of duty, then also the Appellant could not have been proceeded against for the clearances made after 26.03.2013, in terms of Rule 8 (3A) - In the present case admittedly during the period of default appellants have acted as per the provisions of Rule 8 (3A) and have discharged duty consignment wise without utilizing the CENVAT Credit available with them. The matter is remanded to the original authority for very limited purpose verification of the fact of transfer of CENVAT Credit amount of Rs 43,26,000/- from Plant IX to Plant VII in terms of Rule 12A (4) of the CENVAT Credit Rules, 2004. Except for this limited purpose for which matter is remanded back appeal is allowed on all other accounts - appeal allowed in part - part matter on remand.
Issues Involved:
1. Validity of payment of defaulted duty through CENVAT credit. 2. Applicability of Rule 8(3A) of Central Excise Rules, 2002. 3. Demand of duty for the period post-default. 4. Verification of CENVAT credit transfer between units. Detailed Analysis: 1. Validity of Payment of Defaulted Duty through CENVAT Credit: The appellant defaulted in paying the duty of Rs. 5,00,000/- for February 2013 by the due date. They paid this amount through their CENVAT credit account on 26.03.2013. The Commissioner rejected this payment, citing that the credit utilized was not available at the end of February 2013. However, the appellant argued that the payment was valid as per Rule 12A of the CENVAT Credit Rules, 2004, and supported by a Board circular dated 13.04.2018. The Tribunal noted that the Board's Circular No.962/05/2012-CX, dated 28.03.2012, clarified that arrears could be paid using CENVAT credit, and the Gujarat High Court in Advance Surfactant [2017 (358) ELT 53 (Guj)] held the proviso to Rule 3(4) of the CENVAT Credit Rules as unconstitutional. Thus, the Tribunal found the payment through CENVAT credit valid. 2. Applicability of Rule 8(3A) of Central Excise Rules, 2002: Rule 8(3A) mandates that if an assessee defaults in payment of duty beyond 30 days, they must pay duty without utilizing CENVAT credit. The Gujarat High Court in Indsur Global Ltd. v. Union of India [2014 (310) E.L.T. 833 (Guj.)] and the Bombay High Court in Nashik Forge Pvt Ltd [2019 (368) ELT 20 (Bom)] declared Rule 8(3A) unconstitutional to the extent it restricts the use of CENVAT credit. The Tribunal followed these judgments and held that the restriction imposed by Rule 8(3A) was invalid. 3. Demand of Duty for the Period Post-Default: The Commissioner demanded Rs. 4,13,14,846/- for the period from April 2013 to February 2014, arguing that the appellant's payment of Rs. 5,00,000/- on 26.03.2013 was invalid. The Tribunal, however, held that since the payment of the defaulted duty was valid, the subsequent demand could not be sustained. The Tribunal also noted that the demand raised under Rule 8(3A) read with Section 11A was improper as Rule 8(3A) itself was not amenable to Section 11A. 4. Verification of CENVAT Credit Transfer Between Units: The appellant claimed to have transferred Rs. 43,26,000/- from Plant-IX to Plant-VII under Rule 12A(4) of the CENVAT Credit Rules, 2004. The Commissioner did not verify this transfer. The Tribunal remanded the matter to the Commissioner for the limited purpose of verifying this transfer. The Tribunal directed the Commissioner to record findings on the transfer within three months. Conclusion: The Tribunal allowed the appeal, holding that the payment of the defaulted duty through CENVAT credit was valid, Rule 8(3A) was unconstitutional, and the subsequent demand for duty was unsustainable. The matter was remanded to the Commissioner for verification of the CENVAT credit transfer between the appellant's units.
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