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2015 (8) TMI 99 - AT - Central ExciseDemand of excise duty by cash under rule 8(3A) of CER - contravention of Rule 8 (1), 8(3) and 8(3A) of Central Excise Rules, 2002 and Rule 3 (4) of CCR 2004 - appellants defaulted payment of duty on consignment basis through PLA - penalty under rule 25 and Rule 15 - whether appellants have not paid central excise duty on consignment basis during default period and also utilized cenvat credit for payment of duty against the provisions of Rule 8 (3A) of CER - Held that - Both Hon ble Gujarat High Court 2014 (12) TMI 585 - GUJARAT HIGH COURT and Madras High Court 2015 (5) TMI 603 - MADRAS HIGH COURT have held that condition contained in Rule 8 (3A) of Central Excise Rules 2002 for payment of duty without utilisation of cenvat credit is contrary to the scheme of availment of cenvat credit under CCR and the said Rule 8(3A) is arbitrary and violative of Article 14 of the Constitution. Accordingly, the Hon ble High Court has struck down the Rule 8(3A) as unconstitutional. The jurisdictional Hon ble Madras High Court s ruling is binding on the jurisdictional adjudicating authority and also binding on this Tribunal. By respectfully following the ratio of the Hon ble High Court orders referred to supra, we hold that demand of duty under Rule 8(3A) is unsustainable as the said Rule has been struck down by the Hon ble High Court and the demand of duty and penalty imposed in the impugned orders is liable to be set aside - Decided in favour of assessee.
Issues Involved:
1. Validity of demand for excise duty under Rule 8(3A) of the Central Excise Rules, 2002. 2. Constitutionality of Rule 8(3A) of the Central Excise Rules, 2002. 3. Appropriateness of penalties and interest imposed under Rule 25 and Rule 15 of Central Excise Rules, 2002, and Rule 3(4) of CCR 2004. Issue-wise Detailed Analysis: 1. Validity of Demand for Excise Duty under Rule 8(3A) of the Central Excise Rules, 2002: The appellants, manufacturers of excisable goods, defaulted on the payment of central excise duty on a consignment basis through the Personal Ledger Account (PLA) during the relevant period. They were issued show cause notices for contravention of Rule 8 (1), 8(3), and 8(3A) of the Central Excise Rules, 2002, and Rule 3 (4) of CCR 2004. The lower authorities confirmed the demand and appropriated the amounts paid through PLA. The adjudicating authority also imposed penalties under Rule 25 and Rule 15 and ordered interest. The appellants argued that the demand under Rule 8(3A) is invalid as the Hon'ble High Courts have struck down Rule 8(3A) as unconstitutional. 2. Constitutionality of Rule 8(3A) of the Central Excise Rules, 2002: The appellants contended that Rule 8(3A) is unconstitutional, citing judgments from the Hon'ble Gujarat High Court in the cases of Indsur Global India Vs UOI and Precision Fasteners Ltd. Vs CCE, which held that the condition in Rule 8(3A) for payment of duty without utilizing CENVAT credit is unconstitutional. The Hon'ble High Court of Madras concurred with these judgments in the cases of Malladi Drugs & Pharmaceuticals Ltd. and A.R. Metallurgicals Pvt. Ltd., declaring Rule 8(3A) arbitrary and violative of Article 14 of the Constitution. The High Courts ruled that the right to pay duty by utilizing CENVAT credit, a legitimate right accrued to an assessee, cannot be denied arbitrarily under Rule 8(3A). 3. Appropriateness of Penalties and Interest Imposed: The Ld. A.R for the Revenue argued that the adjudicating authority invoked not only Rule 8(3A) but also other rules, including Rule 8(1), 8(3), and Rule 6, and imposed penalties. However, the appellants maintained that since Rule 8(3A) was struck down, the demands and penalties based on this rule should be set aside. The Hon'ble High Courts' judgments were binding on the adjudicating authority and the Tribunal. Consequently, the Tribunal held that the demand of duty under Rule 8(3A) is unsustainable, and the penalties imposed in the impugned orders are liable to be set aside. Conclusion: The Tribunal, following the judgments of the Hon'ble Gujarat High Court and the Hon'ble Madras High Court, concluded that Rule 8(3A) of the Central Excise Rules, 2002, is unconstitutional. Therefore, the demand of duty and penalties imposed under this rule are unsustainable. The appeals of the assessees were allowed with consequential relief, and the appeals of the Revenue were rejected. The stay applications and cross objections were disposed of accordingly.
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