2023 (5) TMI 295 - AT - Central Excise

Utilizing Cenvat Credit - assessee in default in payment of duty - Constitutional validity of Rule 8(3A) of CER - Penalty under Rule 25 of the Central Excise Rules, 2002 - removal of goods without payment of duty - HELD THAT - The issue is squarely covered by the decisions of various High Courts. Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT quashed the provisions of Rule 8(3A) of the Central Excise Rules, 2002 itself, holding the condition contained in sub-rule (3A) of Rule 8 for payment of duty without utilizing the Cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion without utilizing the Cenvat credit of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002, shall be rendered invalid. This decision has been followed by Hon ble Bombay High Court and Hon ble Punjab Haryana High Court and various other High Courts. There are no merits in the present appeal - appeal of Revenue dismissed.

Summary

Issues Involved:
1. Applicability of Rule 8(3A) of the Central Excise Rules, 2002.
2. Imposition of penalty under Rule 25 versus Rule 27.
3. Confiscation of goods removed during the default period.

Summary:

1. Applicability of Rule 8(3A) of the Central Excise Rules, 2002:
The Revenue challenged the Commissioner's decision to drop proceedings against the respondent for defaulting on duty payments from June 2008 to March 2011 and utilizing CENVAT Credit during this period, contrary to Rule 8(3A). The Commissioner had relied on the decision in Solar Chemferts Pvt. Ltd. v/s. CCE, Thane, and held that the demand for duty by utilizing CENVAT Credit amounted to a good discharge of duty. The Tribunal referenced the Gujarat High Court's decision in Indsur Global Ltd., which quashed Rule 8(3A) for being unconstitutional, as it imposed unreasonable restrictions and treated different classes of assessees unequally.

2. Imposition of penalty under Rule 25 versus Rule 27:
The Revenue argued that the Commissioner erred by not imposing a penalty under Rule 25, which should be applicable in cases of default under Rule 8(3A). The Commissioner had instead considered the penalty under Rule 27, citing another show cause notice invoking Rule 27. The Tribunal found that the issue was settled by various High Courts, which invalidated the stringent conditions of Rule 8(3A), thus negating the basis for penalties under Rule 25.

3. Confiscation of goods removed during the default period:
The Revenue sought confiscation of goods removed during the default period under Rule 25(1)(d) of the Central Excise Rules, 2002. The Commissioner had not ordered confiscation, aligning with the respondent's argument that demanding duty again would amount to double jeopardy. The Tribunal upheld this view, referencing the Indsur Global Ltd. decision, which deemed the provisions of Rule 8(3A) as unconstitutional and thus, not enforceable.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue, citing the settled legal position that Rule 8(3A) was unconstitutional. Consequently, the imposition of penalties and confiscation of goods based on this rule were not upheld. The decision by the Commissioner to drop the proceedings was affirmed.