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2019 (11) TMI 235 - AT - Central ExciseDefault in making payment of monthly liability of duty - Wrongful utilization of CENVAT Credit - contravention of Rule 8(3A) of Central Excise Rules, 2002 - period i.e. July 2002 to June 2011 - whether for the default in making payment of monthly liability of duty during the period May 2008 to September 2008, the Appellant would be debarred from utilising CENVAT Credit for the period thereafter i.e. from July 2010 to June 2011? HELD THAT - The issue of utilisation of CENVAT Credit post default in monthly payment of duty under Rule 8(3A) of Central Excise Rules, 2002 is no more res integra. The relevant portion, which debars utilisation of such credit, has been struck down by the Hon ble Gujarat High Court in Indsur Global case 2014 (12) TMI 585 - GUJARAT HIGH COURT where it was held that Condition contained in sub-rule (3A) of rule 8 for payment of duty without utilizing the cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion without utilizing the cenvat credit of sub-rule (3A) of rule 8 of the Central Excise Rules, 2002, shall be rendered invalid. Appeal allowed - decided in favor of appellant.
Issues:
1. Whether the Appellants wrongly utilized CENVAT Credit in discharging their duty liability, leading to a demand notice for recovery of interest and proposing confiscation of goods. 2. Whether the Appellants would be debarred from utilizing CENVAT Credit for a period due to default in making payment of monthly duty liability. 3. Whether the restriction on utilizing CENVAT Credit post-default in monthly payment of duty under Rule 8(3A) of Central Excise Rules, 2002 is valid. Analysis: Issue 1: The Appellants were engaged in the manufacture of excisable goods and wrongly utilized CENVAT Credit to discharge their duty liability. A demand notice was issued for recovery of interest under Section 11AB of Central Excise Act, 1944, and proposing confiscation of goods. The demand was confirmed with a penalty, leading to the present appeal. Issue 2: The key question was whether the Appellants, due to a default in making payment of monthly duty liability, would be debarred from utilizing CENVAT Credit for a subsequent period. The Tribunal considered the issue of utilizing CENVAT Credit post-default in monthly payment of duty under Rule 8(3A) of Central Excise Rules, 2002. Issue 3: The Tribunal examined the validity of the restriction on utilizing CENVAT Credit post-default in monthly payment of duty. The Hon'ble Gujarat High Court in a specific case had struck down the relevant portion of Rule 8(3A) as unconstitutional, stating that it was harsh, unenviable, irrational, arbitrary, and violative of constitutional rights. The Court declared the portion of the rule as invalid, highlighting the unreasonable nature of the restriction. The Tribunal noted that various High Courts and Tribunals had similarly held views favoring the Appellants' position. The Tribunal, in line with these precedents and the judgment in the Appellants' own case, set aside the impugned order, allowing the appeals with consequential relief as per the law. In conclusion, the judgment favored the Appellants, emphasizing the unreasonableness of the restriction on utilizing CENVAT Credit post-default in monthly duty payment. The decision was based on established legal principles and precedents, ultimately leading to the setting aside of the impugned order and allowing the appeals.
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