2018 (12) TMI 658 - AT - Central Excise

Vires of sub-rule 3(A) of Rule 8 of the Central Excise Rules, 2002 - default in payment of monthly duty liability - Revenue has accepted the duty discharged through PLA but objected to reversal of CENVAT credit account in discharging duty liability during the default period. Held that - Issue has been decided in the case of M/S. GEI INDUSTRIAL SYSTEM LTD. VERSUS CCE, BHOPAL 2016 (11) TMI 227 - CESTAT NEW DELHI , where it was held that To hold that the clearances subsequent to March, 2006 as non-duty paid clearance only on the ground that the cenvat credit has been used for payment of such liability, is not legally sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Violation of Rule 8 of the Central Excise Rules, 2002 by utilizing CENVAT credit to discharge duty liability during the default period.

Detailed Analysis:

Issue 1: Violation of Rule 8 of the Central Excise Rules, 2002
The case involved appeals against Order-in-Original passed by the Commissioner of Central Excise, Thane, regarding the appellant's default in discharging their duty liability for specific months. The appellant debited their CENVAT credit account during the default period, leading to a demand for recovery of Central Excise duty. The dispute centered around whether CENVAT credit could be utilized during the default period to discharge duty liability. The appellant contended that various Tribunal judgments, including the GEI Industrial Systems Ltd case, supported the legality of using CENVAT credit for payment during the default period.

Analysis:
The appellant's argument was based on the interpretation of Rule 8(3A) of the Central Excise Rules, 2002, which was held unconstitutional by multiple High Courts. The Tribunal referred to the GEI Industrial Systems Ltd case and noted that the requirement of payment without utilizing CENVAT credit during the default period was inconsistent with legal principles. The Tribunal highlighted that the Gujarat High Court had declared the relevant provision ultra vires, and this decision was supported by other High Courts and Tribunals. The Tribunal emphasized that the appellant had fully discharged the default amount by a certain date, including interest, making the utilization of CENVAT credit for payment legally sustainable.

Conclusion:
Considering the legal precedents and the appellant's compliance with the duty payment, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief as per law. The judgment emphasized the legality of using CENVAT credit for discharging duty liability during the default period, in line with established legal interpretations and court decisions.