2015 (5) TMI 59 - AT - Central Excise

CENVAT Credit - appellant, did not pay its duty though the duty payable has been declared in the ER-I Return - According to the appellant non-payment of duty was due to clerical mistake - Held that - In the circumstances of the case, this was not a case of default, as in the ER-I return for September, 2001 filed by the appellant while the appellant had showed duty payable as ₹ 1,29,541/- they had also shown the cenvat credit balance which was more than sufficient to discharge the duty liability and therefore, there is merit in the appellant s plea that non-payment of duty, which is a small amount for such a big company, was due to bonafide mistake. In any case, when the provisions of Rule 8 (3A) of Central Excise Rules requiring an assessee to pay duty through PLA without utilizing the credit during the period of default beyond the period of one month have been declared as unconstitutional, impugned order itself would not be sustainable. In any case, we do not understand, as to why the Commissioner in respect of the show cause notice dated 02.09.2013 for the period from October, 2012 to June 2013 has confirmed the demand of ₹ 69,06,534/- which had been paid through PLA and has included this amount while imposing penalty of ₹ 69,91,429/-. Prima-facie the order has been passed without any application of mind at all - requirement of pre-deposit of the duty demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof stayed - Stay granted.

Summary

Issues:
1. Non-payment of excise duty due to clerical mistake.
2. Invocation of Rule 8(3A) of the Central Excise Rules, 2002.
3. Constitutional validity of Rule 8(3A) as per judgments of different High Courts.
4. Adjudication of duty demands, interest, and penalties by the Commissioner.
5. Stay application for appeal regarding the duty demands, interest, and penalties.

Analysis:
1. The appellant, a subsidiary of Gas Authority of India Ltd., failed to pay excise duty of Rs. 1,29,941 for September 2010, despite declaring it in their ER-I Return. The non-payment was attributed to a clerical mistake. The appellant had sufficient cenvat credit to cover the duty liability. The Department invoked Rule 8(3A) of the Central Excise Rules, treating the period of default as a forfeiture period, demanding consignment-wise duty payment without utilizing cenvat credit. Interest of Rs. 5,630 was paid later. The Commissioner confirmed the duty demand and imposed penalties, leading to an appeal.

2. The appellant argued that the non-payment was inadvertent and cited a judgment declaring Rule 8(3A) unconstitutional. The Tribunal found merit in the appellant's claim, stating that the duty could have been covered by the available cenvat credit. The Tribunal questioned the sustainability of the order based on the unconstitutional rule. The Commissioner's decision regarding the duty demand for a subsequent period was deemed to lack proper consideration.

3. The Tribunal noted the Gujarat High Court judgment questioning the constitutionality of Rule 8(3A) and the Madras High Court's interpretation of similar provisions. The Tribunal agreed with the appellant's contention that the impugned order might not be sustainable due to the unconstitutional nature of the invoked rule. The Tribunal also criticized the lack of reasoning behind the Commissioner's decision on the subsequent duty demand.

4. Considering the circumstances and the potential unconstitutionality of Rule 8(3A), the Tribunal waived the requirement for pre-deposit of duty demands, interest, and penalties for the appeal hearing. The stay application was granted, allowing the appellant to challenge the duty demands and penalties imposed by the Commissioner.

This detailed analysis covers the issues of non-payment of excise duty, the application of Rule 8(3A), the constitutional validity of the rule, the adjudication by the Commissioner, and the decision on the stay application for the appeal.