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2022 (7) TMI 920 - AT - Central ExciseDefault in the payment of Central Excise Duty - Constitutional Validity of Rule 8(3A) of the CCR - default in payment of duty for the clearances effected during January 2013 - For the period 26.03.2013 to 31.12.2013 the Central Excise duty was paid by the assessee through their Cenvat credit account - Revenues contention is that the payment made by the appellant by way of debit in his CENVAT Account is not proper discharge of defaulted duty for the month of January 2013 - HELD THAT - From the correspondences 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 - 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 unit at Hyderabad was having sufficient credit balance of Rs 8,56,63,033/- in their CENVAT Account at the close of the January 2013. If they the appellant request to operate under the LTU scheme was allowed during any month prior to January 2013 or during the month of January 2013, they would have transferred this balance to their unit in Mumbai and would have utilized the same for payment of the duty. In fact appellant transferred this amount from their Hyderabad unit after being accorded the permission to join LTU on 28.02.2013. They utilized this transferred credit for payment of the defaulted duty for the month of January 2013. The delay in according the permission to operate as LTU, was primary reason for the delay in available credit from the Hyderabad Unit to Mumbai Unit. There are no justification in holding that the payment of amount of Rs 1,92,64,263/- from their CENVAT account was not enough to discharge the duty arrears for the month of Jan-2013 in terms of Rule 8 of the Central Excise Rules, 2013. Undisputedly appellants have discharged the duty as demanded in the show cause notice and confirmed against them for the subsequent period from their CENVAT account. The demands have been made against them considering that the payment of the defaulted duty for the Month of Jan-2013 on 26.03.2013 from their CENVAT Account was not a valid payment. Once, it is held that the payment from their CENVAT account was valid payment the demands for the subsequent period will automatically be not sustained. 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 January 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) - Hypothetically consider the situation whereby an assessee discharges the duty liability for a month on or before the due date as per Rule 8, by way of debit entry in the credit account and subsequently the debit so made is found to be erroneous/ malafide, then also the rigors of Rule 8 (3A) will not come into picture because in the first instance assessee has discharge the duty payable by the due date albeit subsequently found to be erroneous/ malafide. In such case the revenue proceeds against such defaulter by way of initiation of proceedings for short/ nonpayment of duty in terms of Section 11A of the Central Excise Act, 1944. This short/ non-payment cannot tiger the Rule 8 (3A) automatically into action. Rule 8 (3A), as it existed then provided a mechanism for ensuring the payment of the admitted duty liability of the month by the due date as per Rule 8. 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. In the case of SHIVAM PRESSINGS VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2015 (7) TMI 581 - CESTAT MUMBAI referred by the authorized representative, tribunal has in para 4.1, after referring to the order of Hon ble Gujarat High Court in case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT , dropped the demand of duty made treating the payments made through CENVAT account as proper payment of duty in respect of the consignments cleared during the period of default. Thus by application of the ratio of this judgement, the demand of duty made by the revenue for the period after 26.03.2013, the demand of duty needs to be set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Validity of the payment of defaulted duty using CENVAT credit. 2. Applicability of Rule 8(3A) of the Central Excise Rules, 2002. 3. Recovery of duty and interest under Section 11A of the Central Excise Act, 1944. 4. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002. Issue-wise Detailed Analysis: 1. Validity of the Payment of Defaulted Duty Using CENVAT Credit: The appellant defaulted in payment of duty for January 2013 and paid the defaulted amount on 26.03.2013 through their CENVAT credit account. The Commissioner held this payment as invalid under Rule 8(3A) of the Central Excise Rules, 2002. However, the Tribunal noted that the Hon'ble Gujarat High Court in the case of Indsur Global Ltd. declared Rule 8(3A) unconstitutional to the extent it prohibits the use of CENVAT credit for payment of duty. The Tribunal observed that the Board's Circular No. 962/05/2012-CX allows the use of CENVAT credit for payment of arrears. Additionally, the Hon'ble Gujarat High Court in Advance Surfactant held the proviso to Rule 3(4) of the CENVAT Credit Rules, 2004, unconstitutional, allowing the utilization of CENVAT credit for duty payment. Thus, the Tribunal concluded that the payment of Rs. 1,92,64,263/- from the CENVAT account was valid. 2. Applicability of Rule 8(3A) of the Central Excise Rules, 2002: The Tribunal noted that Rule 8(3A) was struck down by multiple High Courts, including Gujarat, Bombay, and Madras, as unconstitutional. The Tribunal referenced the Hon'ble Bombay High Court's decision in Nashik Forge Pvt Ltd., which affirmed the Gujarat High Court's ruling. The Tribunal rejected the revenue's argument to remand the case pending the Supreme Court's decision, citing the Hon'ble Bombay High Court's ruling in Twenty First Century Wires Rods Ltd. Therefore, the Tribunal held that the rigors of Rule 8(3A) do not apply to the appellant's case after 26.03.2013. 3. Recovery of Duty and Interest under Section 11A of the Central Excise Act, 1944: The Tribunal observed that the show cause notice and the adjudicating authority's order invoked Rule 8(3A) read with Section 11A for recovery of duty and interest. The Tribunal noted that Rule 8(3A) is not amenable to Section 11A, as it mandates consignment-wise duty payment in cash during the default period. Since the appellant paid the defaulted duty on 26.03.2013, the subsequent demand for the period from 26.03.2013 to 31.12.2013 was unsustainable. The Tribunal also highlighted that the appellant's delay in obtaining LTU membership contributed to the default, and the CENVAT credit transfer from the Hyderabad unit would have otherwise covered the duty payment. 4. Imposition of Penalty under Rule 25 of the Central Excise Rules, 2002: The Tribunal found no justification for imposing a penalty of Rs. 33,78,20,452/- under Rule 25. Since the payment of defaulted duty through the CENVAT account was valid and the demands for the subsequent period were unsustainable, the penalty imposed was also set aside. Conclusion: The Tribunal set aside the impugned order, allowing the appeal. It held that the payment of defaulted duty using CENVAT credit was valid, Rule 8(3A) was inapplicable post-26.03.2013, and the demands and penalties imposed were unsustainable. The Tribunal emphasized adherence to judicial precedents and Board's clarifications, ensuring fair treatment of the appellant's case.
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