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2023 (3) TMI 1210 - AT - Central ExciseConstitutional Validity of Rule 8(3A) of Central Excise Rules - discharge of duty without utilizing Cenvat Credit - HELD THAT - The issue is no more res integra and is squarely covered by the judgement of the Hon ble Calcutta High Court in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS 2017 (8) TMI 1515 - CALCUTTA HIGH COURT , wherein it is categorically held that when Rule 8 (3A) is declared ultra vires by the different High Courts then the Revenue cannot take a different stand contrary to the said judgements. The Hon ble Court further declared Rule 8(3A) as invalid which is not stayed by the Hon ble Supreme Court. Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT has declared the words without utilizing Cenvat Credit under Rule 8(3A) as ultra vires which means that the assessee can discharge duty by utilizing Cenvat Credit which is what exactly has been done in the instant case by the Appellant - the said judgment has been followed by the Hon ble Calcutta High Court in the case of Goyal MG Gases Pvt.Ltd. v. UOI cited (supra) which is not stayed by the Hon ble Supreme Court. The Hon ble Calcutta High Court in the said case, has declared the provisions of Rule 8(3A) ibid as invalid and further has held that the Revenue cannot take a different stand and parity has to be extended to the assessee. The demand in the instant case has been raised for contravention of Rule 8(3A) ibid restricting utilization of Cenvat credit during the period of default which provision has been declared ultra vires/invalid by Court, hence the demand cannot be sustained - the demand of duty and the penalties of Rs.6,00,000/- and Rs.1,00,000/- set aside - appeal allowed.
Issues involved:
The issues involved in the judgment are related to the imposition of penalty under Rule 25 of the Central Excise Rules, 2002, the applicability of Rule 27, the validity of penalty imposition without specifying the sub-rule, the utilization of Cenvat Credit for duty payment, and the declaration of Rule 8(3A) as invalid. Imposition of Penalty under Rule 25: The Ld. Commissioner upheld the demand of duty but reduced the penalty imposed under Rule 25 from Rs.10,00,000/- to Rs.6,00,000/- and from Rs.1,80,000/- to Rs.1,00,000/-, considering the mitigating factor of payment of defaulted duty with interest before adjudication. The Appellants challenged the penalty imposition under Rule 25, arguing that no penalty should be imposed due to financial stringency and the absence of intent to evade duty. However, the Tribunal found that the issue was settled by previous judgments declaring Rule 8(3A) as invalid, leading to the setting aside of the demand of duty and penalties. Applicability of Rule 27: The Appellants contended that penalty should have been imposed under Rule 27 of the Central Excise Rules, 2002, instead of Rule 25. They cited previous judgments to support their argument. However, the Tribunal ruled that the demand for contravention of Rule 8(3A) was not sustainable due to its invalidity, thereby rendering the discussion on Rule 27 irrelevant. Validity of Penalty Imposition without Specifying Sub-rule: The Appellants raised concerns about the imposition of penalty under Rule 25 without specifying the sub-rule in the Show Cause Notice. They argued that this practice was not maintainable based on legal precedents. The Tribunal did not delve deeply into this issue as the demand was set aside due to the invalidity of Rule 8(3A), making the specific sub-rule for penalty imposition inconsequential. Utilization of Cenvat Credit for Duty Payment: The Tribunal referenced judgments declaring Rule 8(3A) as ultra vires, allowing duty payment using Cenvat Credit. The Appellant had paid duty from the Cenvat Credit account, which was deemed permissible in light of the legal invalidity of Rule 8(3A). Consequently, the demand of duty and penalties were set aside, providing relief to the Appellants. Declaration of Rule 8(3A) as Invalid: The Tribunal reiterated the judgments declaring Rule 8(3A) as invalid, emphasizing that the demand based on contravention of this rule could not be sustained. Following the legal precedent, the Tribunal set aside the demand of duty and penalties, providing consequential relief to the Appellants.
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