2019 (4) TMI 1333 - AT - Central Excise

Bar on utilization of CENVAT Credit - default in making payment of Central Excise Duty - constitutional validity of Rule 8 (3A) of the Central Excise Rules, 2002 - HELD THAT - The Jurisdictional High Court at Calcutta, in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS 2017 (8) TMI 1515 - CALCUTTA HIGH COURT has followed the decision of the Gujarat High Court in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT and has held the portion of rule 8 (3A) as ultra vires. There is no bar in making use of Cenvat Credit in making payment of Central Excise Duty even during default period, in view of the fact that the Rule 8 (3A) ibid which steps otherwise, has been struck down as ultra vires. The portion of the order imposing penalties as well as demand for Central Excise Duty is set aside - appeal disposed off.

Summary

Issues:
1. Whether payment of Central Excise Duty using Cenvat Credit during a default period is permissible.
2. Whether interest under Section 11AB of the Act and penalty under Rule 25 should be imposed.

Analysis:
1. The appeal pertains to a case where the respondent, a manufacturer of excisable goods, utilized Cenvat Credit for discharging part of the Excise Duty liability during a specific period. The Revenue contended that the remaining duty amount, not paid in cash by the due date, resulted in default in payment. The Revenue argued that duty should have been paid in cash without utilizing the accumulated Cenvat Credit during the default period. The Show Cause Notice invoked Rule 8(3A) to demand payment in cash, leading to the imposition of a penalty under Rule 27 but not under Rule 25. The Revenue appealed seeking the imposition of interest under Section 11AB and penalty under Rule 25.

2. During the proceedings, it was highlighted that Rule 8(3A) of the Central Excise Rules, 2002, which formed the basis for demanding duty payment in cash during the default period, had been declared ultra vires by various High Courts. Several legal precedents were cited to support this position, emphasizing that the use of accumulated Cenvat Credit for duty payment during a default period was permissible. The Tribunal, in line with the decisions of the Jurisdictional High Court and other relevant judgments, concluded that there was no restriction on utilizing Cenvat Credit even during a default period for discharging Central Excise Duty. Consequently, the Tribunal rejected the Revenue's plea for imposing interest under Section 11AB and penalty under Rule 25, as there was no legal basis to support such demands.

In conclusion, the Appellate Tribunal held that the use of accumulated Cenvat Credit for Central Excise Duty payment during a default period was permissible based on legal precedents and the decision of the Jurisdictional High Court. Therefore, the appeal filed by the Revenue seeking interest and penalty imposition was rejected.