2025 (3) TMI 494 - AT - Central Excise

Denial of utilization of CENVAT Credit for payment of duty during the defaulted period in terms of Rule 8(3A) of Central Excise Rules 2002 - HELD THAT - The Hon ble High Court in COMMISSIONER OF CGST AND CX HOWRAH COMMISSIONERATE VERSUS M/S. RUSTECH PRODUCTS PRIVATE LIMITED 2024 (7) TMI 814 - CALCUTTA HIGH COURT has held that matter should be kept pending and is to be taken only after the Special Leave to Appeal No. 16523/2015 is decided by the Hon ble Apex Court. It is found that the issue in the case of Indsur Global Ltd. 2024 (7) TMI 1559 - SC ORDER (LB) has already been decided by the Hon ble Supreme Court. In these circumstances the issue is presently not pending before the Hon ble Supreme Court. Thus in our view there is no bar in taking up the issue for a decision based on the available documents. The demand of duty along with interest confirmed in the impugned order is not sustainable and accordingly we set aside the same. As the demand for recovery of CENVAT Credit during the defaulted period is not sustainable consequently we hold that no penalty is imposable on the appellant. Conclusion - The ultra vires declaration of Rule 8(3A) by the High Courts prevents the denial of CENVAT Credit utilization during the defaulted period. Appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the appellant, M/s. Haragouri Steels Private Limited, can be denied the utilization of CENVAT Credit for payment of duty during the defaulted period under Rule 8(3A) of the Central Excise Rules, 2002. The appellant challenges the demand and penalty imposed for alleged misutilization of CENVAT Credit during the defaulted period, arguing that the rule has been declared ultra vires by certain High Courts.

ISSUE-WISE DETAILED ANALYSIS

1. Relevant legal framework and precedents

The legal framework revolves around Rule 8(3A) of the Central Excise Rules, 2002, which restricts the utilization of CENVAT Credit for payment of duty during a defaulted period. The appellant relies on precedents from the Gujarat High Court (Indsur Global Ltd. v. Union of India) and the Punjab and Haryana High Court (Sandley Industries v. Union of India), which have declared Rule 8(3A) as ultra vires. These decisions form the basis for the appellant's argument that the utilization of CENVAT Credit cannot be denied.

2. Court's interpretation and reasoning

The Tribunal observed that the Gujarat and Punjab & Haryana High Courts have declared Rule 8(3A) ultra vires, thus setting a precedent that CENVAT Credit cannot be denied for utilization during the defaulted period. The Tribunal noted that the Hon'ble Calcutta High Court had deferred its decision pending the outcome of a related matter before the Supreme Court. However, the Supreme Court has since disposed of the matter, and the Department has withdrawn its appeal, removing any bar on the Tribunal's ability to decide the issue.

3. Key evidence and findings

The Tribunal considered the legal precedents set by the Gujarat and Punjab & Haryana High Courts. It also acknowledged the Supreme Court's disposition of the related appeal, which involved the withdrawal of the Department's case due to the tax effect falling below the threshold set by the Central Board of Indirect Taxes and Customs.

4. Application of law to facts

The Tribunal applied the legal principles established by the aforementioned High Court decisions to the facts of the case, concluding that the appellant cannot be denied the utilization of CENVAT Credit for the payment of duty during the defaulted period. The Tribunal found that the demand for recovery of CENVAT Credit during the defaulted period is unsustainable, and consequently, no penalty should be imposed on the appellant.

5. Treatment of competing arguments

The Tribunal considered the argument of the Revenue, which referred to the pending decision of the Calcutta High Court. However, the Tribunal determined that the Supreme Court's disposition of the related appeal negated any pending issues, allowing the Tribunal to proceed with its decision based on the available precedents.

6. Conclusions

The Tribunal concluded that the demand for duty and the imposition of penalty based on the alleged misutilization of CENVAT Credit are not sustainable. The Tribunal set aside the impugned order and allowed the appeal with consequential relief to the appellant.

SIGNIFICANT HOLDINGS

The Tribunal held that the provisions of Rule 8(3A) of the Central Excise Rules, 2002, as declared ultra vires by the Gujarat and Punjab & Haryana High Courts, cannot be used to deny CENVAT Credit utilization. The Tribunal stated, "Considering the fact that the provision of Rule 8(3A) of Central Excise Rule, 2002 has been declared ultra vires...we hold that Cenvat Credit cannot be denied to the appellant for utilization of payment of duty during the defaulted period."

The core principle established is that the ultra vires declaration of Rule 8(3A) by the High Courts prevents the denial of CENVAT Credit utilization during the defaulted period. The Tribunal's final determination was to set aside the impugned order, allowing the appeal with consequential relief to the appellant.

← Previous Next →