9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (6) TMI 770 - HC - Central ExciseDefault in payment of excise duty - restriction on utilizing Cenvat Credit - Rule 8(3A) of the Central Excise Rules, 2002 - they were directed to pay the duty amount, on consignment basis. They paid the duty liability through CENVAT Credit and subsequently, there was change in law. The Department contended that the punishment would continue, till the default is fully discharged and during that period, duty has to be paid through Personal Ledger Account (in short PLA ) on consignment basis. Held that - this Court in M/s.Malladi Drugs & Pharmaceuticals Ltd., v. UOI and others 2015 (5) TMI 603 - MADRAS HIGH COURT , held Rule 8(3A) as ultra vires of Article 14 of the Constitution of India, the same is binding on the Department. - appellant / revenue submitted that the decision in Malladi Drugs & Pharmaceuticals case, has been challenged, but no copy of the order of stay is placed before us - Revenue appeal dismissed - Decided against the revenue.
Issues Involved:
1. Applicability of Rule 8(3A) of the Central Excise Rules, 2002. 2. Validity of payment of duty using CENVAT credit during the default period. 3. Constitutionality of Rule 8(3A) under Article 14 of the Constitution of India. Detailed Analysis: 1. Applicability of Rule 8(3A) of the Central Excise Rules, 2002: The core issue revolves around whether Rule 8(3A) of the Central Excise Rules, 2002, which mandates that duty should be paid only through the Personal Ledger Account (PLA) if the assessee defaults in payment beyond the prescribed time, applies to this case. The Department argued that the rule restrains the assessee from using CENVAT credit until the entire outstanding demand, including interest, is paid. The Tribunal, however, found that the non-obstante clause introduced by sub-rule 3A in Rule 8 of CER, 2002, was applicable only from 31.03.2005, while the period in dispute was prior to that date. Thus, the Tribunal held that the assessee could discharge the liability either out of PLA or by utilizing CENVAT credit, as supported by the Kerala High Court decision in Thanikkudam Bhagawati Mills Ltd., v. CCE, Calicut. 2. Validity of Payment of Duty Using CENVAT Credit During the Default Period: The Tribunal examined whether the payment of duty utilizing CENVAT credit during the default period was valid under the Excise Law. The assessee contended that the change of law regarding deferred monthly payment facility did not apply to them and relied on several judicial precedents, including the decision in M/s. Noble Drugs Ltd., v. CCE, Nasik. The Tribunal agreed with the assessee, noting that the relevant rule during the period in question allowed for the use of CENVAT credit. The Tribunal also referenced the Madras High Court's ruling in M/s. Malladi Drugs & Pharmaceuticals Ltd., which held that Rule 8(3A) was unconstitutional and that the assessee's right to use CENVAT credit was indefeasible. 3. Constitutionality of Rule 8(3A) Under Article 14 of the Constitution of India: The Tribunal and the High Court both addressed the constitutionality of Rule 8(3A) of the Central Excise Rules, 2002. The Madras High Court, in M/s. Malladi Drugs & Pharmaceuticals Ltd., v. UOI, held that Rule 8(3A) was ultra vires Article 14 of the Constitution of India, which guarantees equality before the law. The court found that the rule imposed unreasonable restrictions by preventing an assessee from using CENVAT credit to discharge duty liabilities, thereby violating the principles of equality and fairness. The Gujarat High Court in Indsur Global Ltd., v. UOI also declared the rule unconstitutional, emphasizing that it imposed harsh and arbitrary restrictions on the right to carry on trade or business. Conclusion: The High Court dismissed the appeal, affirming the Tribunal's decision that the assessee could use CENVAT credit to discharge its duty liabilities during the default period. The court also upheld the finding that Rule 8(3A) of the Central Excise Rules, 2002, was unconstitutional as it violated Article 14 of the Constitution of India. The appeal was dismissed on the grounds that the Tribunal's decision was consistent with the judicial precedents and the constitutional principles of equality and fairness.
|
