2023 (6) TMI 1242 - AT - Central Excise

Recovery of dis-allowed CENVAT Credit - contravention of Rule 8(3A) ibid restricting utilization of Cenvat credit during the period of default - HELD THAT - 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 M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS 2017 (8) TMI 1515 - CALCUTTA HIGH COURT 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 and the Appeal, thus, succeed on this count.

Summary

Issues Involved:
The disallowance of Cenvat Credit, recovery order with interest, penalty imposition, and validity of Rule 8(3A).

Disallowance of Cenvat Credit and Recovery Order:
The Ld. Commissioner disallowed Cenvat Credit of Rs. 55,67,699/- taken by the appellant company during June 2004 to June 2009. The order included recovery of the disallowed amount with interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11A & 11AB of the Central Excise Act, 1944. Additionally, a penalty of equal amount was imposed under Rule 15 of the Cenvat Credit Rules, along with a separate penalty on an individual under Rule 26 of the Central Excise Rules, 2002.

Communication and Submission of Details:
The excise authorities requested details of credit taken on capital goods and reversal of credit on non-admissible capital goods. The appellant complied by providing the required information and technical write-ups of various capital goods, including photographs. Furthermore, a statement of the Project Manager was recorded under Section 14 of the Act.

Appellant's Defense and Legal Precedents:
The appellant argued that the disallowed credit was availed without personal involvement or violation of provisions by the Project Manager. Legal precedents were cited, including a judgment by the Hon'ble Calcutta High Court, which declared Rule 8(3A) as invalid and held that the Revenue cannot take a different stand contrary to such judgments. The Hon'ble Gujarat High Court also declared certain provisions as ultra vires, allowing discharge of duty by utilizing Cenvat Credit.

Judgment and Conclusion:
The Tribunal found that the demand was raised based on a provision (Rule 8(3A)) that was declared ultra vires/invalid by the Court. Consequently, the demand could not be sustained, leading to the setting aside of the impugned order and allowing the appeals with any consequential reliefs. The decision was pronounced in the open court on 28 June 2023.