2018 (11) TMI 1373 - AT - Central Excise

Forfeiture of the facility of utilizing the CENVAT credit as per Rule 8(3A) of Central Excise Rules - non-payment/short payment of duty - Held that - The Division Bench of Delhi Tribunal in the case of GEI Industrial System Ltd. 2016 (11) TMI 227 - CESTAT NEW DELHI after considering the various decisions of the High Courts and also the fact that the Supreme Court has granted a Stay Order in the case of Indsur Global Ltd., has come to the conclusion that the ratio adopted by the various High Courts and by the Tribunal in similar set of facts is still binding and has allowed the appeal of the assessee - appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of Rule 8(3A) of Central Excise Rules - Payment of duty through cenvat credit - Legality of penalty imposed under Section 11AC of Central Excise Act 1944.

Analysis:

Violation of Rule 8(3A) of Central Excise Rules:
The appellant, a manufacturer of motor vehicle parts, had short-paid duty in May 2012, leading to a forfeiture of CENVAT credit utilization facility due to non-payment within the stipulated time. The appellant subsequently paid the duty through CENVAT credit during July 2012 to March 2014, which was deemed ineligible under Rule 8(3A). The appellant also failed to file electronic returns during this period, incurring liability for penalties. The appellant contended that the payment of duty through CENVAT credit was lawful, citing precedents where Rule 8(3A) had been deemed unconstitutional by various High Courts and upheld by the Tribunal in similar cases. Notably, the Gujarat High Court's decision in Indsur Global Ltd. v. UOI was highlighted as a key precedent. The appellant argued that penalties imposed under Section 11AC of the Central Excise Act 1944 were not justified as there was no intent to evade duty.

Legality of Penalty Imposed:
The Assistant Commissioner defended the impugned order, citing a stay on the Gujarat High Court's decision in Indsur Global Ltd. by the Supreme Court and asserting that the appellants were not entitled to any benefit. However, the Tribunal, after considering submissions from both parties and reviewing relevant precedents, including the stay order by the Supreme Court, concluded that the Division Bench's decision in GEI Industrial System Ltd. supported by the Supreme Court's stay order in Indsur Global Ltd. case, was binding. The Tribunal found the impugned order unsustainable in law and set it aside, allowing the appeal of the appellant with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the payment of duty through CENVAT credit was lawful, relying on precedents where Rule 8(3A) was deemed unconstitutional. The penalty imposed under Section 11AC of the Central Excise Act 1944 was also found to be legally untenable due to the absence of intent to evade duty. The Tribunal's decision was based on a thorough analysis of legal precedents and relevant statutory provisions, ensuring justice and fairness in the adjudication of the case.