2023 (5) TMI 1078 - AT - Central Excise

Default in paying Central Excise duty on monthly basis as per Rule 8 of Central Excise Rules, 2002 - contravention of Rule 8 (3A) of CER - HELD THAT - The Rule 8(3A) in terms of which revenue has asked for recovery of the amounts paid by the appellant from their cenvat credit account have been quashed by the Hon ble High Court of Gujarat in case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT observing that 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. Thus, there are no merits in the appeal filed by the revenue - appeal dismissed.

Summary

Issues Involved:
1. Default in payment of Central Excise duty.
2. Utilization of Cenvat credit during the default period.
3. Imposition of interest and penalties.
4. Validity of Rule 8(3A) of the Central Excise Rules, 2002.

Summary:

1. Default in Payment of Central Excise Duty:
The appellant defaulted in paying Central Excise duty on a monthly basis for June 2010 and from October 2010 to April 2011 due to the dishonor of cheques. The total default amount was Rs. 1,76,55,000/-, which was recovered later along with interest of Rs. 11,54,875/-.

2. Utilization of Cenvat Credit During Default Period:
As per Rule 8(3A) of the Central Excise Rules, 2002, the appellant was required to pay duty on each consignment at the time of removal without utilizing Cenvat credit during the default period. However, the appellant utilized Cenvat credit of Rs. 80,99,532/- for payment of duty, leading to a show cause notice.

3. Imposition of Interest and Penalties:
The Commissioner confirmed the demand of Rs. 1,76,55,000/- and ordered recovery under Section 11A(1) and Section 11A(4) of CEA, 1944. Interest under Section 11AB (Section 11AA w.e.f. 08-04-2011) was also ordered, and a penalty of Rs. 1,76,55,000/- was imposed under Section 11AC of CEA, 1944. Additionally, a penalty of Rs. 5,000/- was imposed under Rule 27 of Central Excise Rules, 2002, and Rs. 15,00,000/- each on both directors under Rule 25(1) of CER, 2002.

4. Validity of Rule 8(3A) of the Central Excise Rules, 2002:
The Hon'ble High Court of Gujarat in Indsur Global [2014 (310) E.L.T. 833 (Guj.)] and the Hon'ble Bombay High Court in Nashik Forge [2019 (368) ELT 20 (Bom)] quashed Rule 8(3A) of the Central Excise Rules, 2002, as unconstitutional. The courts held that the rule imposed unreasonable restrictions by requiring defaulters to pay duty without utilizing Cenvat credit, thereby violating Articles 14 and 19(1)(g) of the Constitution.

Judgment:
- Appeals by the directors were dismissed for non-prosecution under Rule 20 of CESTAT Procedures Rule, 1982.
- The appeal by the revenue was dismissed on merits, following the decisions of the Hon'ble High Courts that quashed Rule 8(3A) as unconstitutional.

(Order pronounced in the open court)