2015 (10) TMI 1643 - AT - Central Excise

Duty demand - Whether during the period of default in discharge of duty liability beyond the period of one month from the due date, the assessee is required to pay duty without utilizing the cenvat credit or whether during this period, he can pay the duty on the clearances made by utilizing the cenvat credit - Held that - Though on this issue, the Hon ble Madras High Court in the case of Unirols Airtex Vs. Asstt. Commissioner of Central Excise, Coimbatore (2013 (12) TMI 1398 - MADRAS HIGH COURT) has decided the issue against the appellant holding that during the period of default beyond the period of one month form the due date, the duty on the clearances is required to pay through cash without utilizing the cenvat credit, Hon ble Madras High Court in this case has not gone into the question of constitutionality of the provision. The Hon ble Gujarat High Court in the case of Indsur Global Ltd. (2014 (12) TMI 585 - GUJARAT HIGH COURT), after going into the question of constitutionality of this provision, has held that the condition contained in Rule 8(3A) regarding payment of duty without utilizing the cenvat credit during the period of default beyond the period of one month from the due date is unconstitutional. Accordingly, we hold that the appellant have strong prima facie case in their favour. Therefore, the requirement of pre-deposit of duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed. - Stay granted.

Issues involved:
Interpretation of Rule 8(3A) of the Central Excise Rules regarding payment of duty during default period beyond one month from due date utilizing cenvat credit, constitutionality of Rule 8(3A), prima facie case in favor of appellant, waiver of pre-deposit requirement for duty demand, interest, and penalty, stay application.

Analysis:

1. Interpretation of Rule 8(3A) of the Central Excise Rules:
The case involved a dispute regarding the payment of duty during a default period beyond one month from the due date, specifically whether the assessee is required to pay duty without utilizing the cenvat credit. The appellant argued that they paid duty during the default period by utilizing cenvat credit, while the Department contended that duty should have been paid through PLA as per Rule 8(3A). The Hon'ble Madras High Court had previously held that duty during such default periods must be paid in cash without utilizing cenvat credit. However, the Hon'ble Gujarat High Court in a separate case declared the condition in Rule 8(3A) unconstitutional, allowing duty payment using cenvat credit during default periods.

2. Constitutionality of Rule 8(3A):
The crux of the issue revolved around the constitutionality of Rule 8(3A) of the Central Excise Rules, 2002, which mandates payment of duty without utilizing cenvat credit during default periods beyond one month from the due date. The appellant relied on the judgment of the Hon'ble Gujarat High Court, which declared this provision unconstitutional. This declaration influenced the decision in favor of the appellant, as the Tribunal found a strong prima facie case in their favor based on the constitutional aspect of Rule 8(3A.

3. Prima Facie Case in Favor of Appellant:
After considering the arguments from both sides and reviewing the records, the Tribunal concluded that the appellant had a strong prima facie case in their favor due to the judgment of the Hon'ble Gujarat High Court regarding the constitutionality of Rule 8(3A). The Tribunal noted that the Hon'ble Madras High Court's decision did not address the constitutionality aspect, and therefore, the appellant's reliance on the Gujarat High Court's judgment was pivotal in determining the outcome of the case.

4. Waiver of Pre-deposit Requirement and Stay Application:
Given the strong prima facie case in favor of the appellant, the Tribunal decided to waive the requirement of pre-deposit for duty demand, interest, and penalty, allowing the appeal to be heard without immediate financial obligations on the appellant. The Tribunal granted a stay on the recovery of the amounts in question, based on the constitutional interpretation provided by the Hon'ble Gujarat High Court and the corresponding impact on the applicability of Rule 8(3A) in the case at hand.

In conclusion, the Tribunal's decision was influenced by the constitutional interpretation of Rule 8(3A) provided by the Hon'ble Gujarat High Court, which favored the appellant and led to the waiver of pre-deposit requirements and the grant of a stay on the recovery of duty demand, interest, and penalty.

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