2016 (3) TMI 302 - AT - Central Excise

Payment of duty through Cenvat account - Held that - It is a fact that the show-cause notice, Order-in-Original and Order-in-Appeal are based on the violation of Rule 8(3A) of the Central Excise Rules, 2002 which require the payment of duty only through account current in case of violation of payment of duty in time as prescribed in Rule 8. As submitted by the ld. Counsel for the appellant that this Rule 8(3A) has been struck down by Hon ble High Court of Gujarat, Madras and Punjab & Haryana in various judgments, no duty and penalty can be imposed as observed in the case of Shreeji Surface Coatings P. Ltd. (2014 (12) TMI 656 - GUJARAT HIGH COURT ). Since the rule under which the entire proceedings have been initiated have been declared unconstitutional, no liability arises under the said Rules. Therefore, keeping in view the law laid down by the Hon ble High Court of Gujarat, Madras and Punjab & Haryana, set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any. SEE Indsur Global Ltd. 2014 (12) TMI 585 - GUJARAT HIGH COURT , Malladi Drugs & Pharmaceuticals P. Ltd. (2015 (5) TMI 603 - MADRAS HIGH COURT ), A.R. Metallurgicals P. Ltd. (2015 (5) TMI 661 - MADRAS HIGH COURT ) and Sandley Inds. (2015 (10) TMI 2455 - PUNJAB & HARYANA HIGH COURT )

Summary

Issues involved:
Violation of Rule 8(3A) of the Central Excise Rules, 2002 leading to non-payment of duty, imposition of penalty, and subsequent appeal challenging the order.

Detailed Analysis:

1. Violation of Rule 8(3A) and non-payment of duty:
The case involved the appellant, a manufacturer of excisable goods, who failed to pay duty consignment-wise without utilizing CENVAT Credit as required by Rule 8(3A) for certain months. The appellant also failed to pay duty on due dates and used CENVAT Credit instead of paying through PLA for specific months. This led to a show-cause notice demanding duty payment along with interest and penalty. The Adjudicating Authority confirmed the demand with a penalty of Rs. 10 lakhs under Rule 25, which was later reduced to Rs. 5000 by the Commissioner (Appeals).

2. Legal challenge and constitutional validity:
The appellant challenged the order, arguing that Rule 8(3A) has been declared unconstitutional by various High Courts, citing specific judgments. The appellant contended that since the rule itself has been struck down, any demands or penalties based on it cannot stand. The appellant referenced cases where penalties under Rule 25 were not upheld for contraventions of Rule 8, and emphasized that no penalty should be imposed due to the rule's invalidity.

3. Judicial precedents and Tribunal decisions:
The appellant relied on judgments from different High Courts to support the argument that penalties under Rule 25 cannot be imposed for violations of Rule 8, especially after its constitutional invalidation. The appellant also highlighted a Tribunal decision where an appeal was allowed based on similar grounds, reinforcing the argument against the imposition of penalties.

4. Decision and relief granted:
Considering the legal position established by the High Courts and the Tribunal's previous ruling, the appellate authority set aside the impugned order. The authority concluded that since Rule 8(3A) has been declared unconstitutional, no liability arises under the said Rules. The appeal was allowed, providing consequential relief to the appellant, if any.

In summary, the judgment revolved around the violation of Rule 8(3A) of the Central Excise Rules, 2002, leading to non-payment of duty, imposition of penalties, and subsequent legal challenges based on the rule's constitutional invalidity. The decision favored the appellant, setting aside the order and providing relief in line with the established legal precedents and the rule's invalidated status.