2021 (4) TMI 1109 - HC - Central Excise

Default in payment of duty - Applicability of Rule 8(3A) of CER or section 11A of CEA - applicability of the case of Gujarat High Court in Indsur Global Ltd's case 2014 (12) TMI 585 - GUJARAT HIGH COURT - HELD THAT - In the instant case, admittedly the assessee had already paid as duty even before the audit declared amounts as payable. Rule 8(3A) applies to cases where the assessee had defaulted in payment of excise duty beyond 30 days from the due date. So, the said rule cannot apply to the instant case and as rightly held by the CESTAT, the said Rule does not apply to every case where in the department, during the scrutiny of returns, during audit or during investigation finds any additional amount payable as duty of excise. Such demands would be recoverable by issuing a notice under Section 11A of the Act and would be covered under Rule 8(3A) - The Tribunal has given cogent reasons for its finding that the assessee's case is a case of demand under Section 11A and is not covered by Rule 8(3A) and the Revenue was not correct in denying utilization of Cenvat Credit to the assessee by applying the said sub-rule. Gujarat High Court in Indsur Global Ltd's case declared that portion of sub-Rule (3A) of Rule 8, which requires a defaulter to clear the finished products on payment of excise duty without availing the Cenvat Credit as unreasonable and violative of Article 14 of the Constitution of India holding that it amounts to a serious restriction on the assessee's fundamental right to carry on trade or business of his choice which is guaranteed under Article 19(1)(g) of the Constitution of India - Merely because the Hon'ble Supreme Court granted stay of the said order of the Gujarat High Court, it is not open to the appellant herein to contend that the ratio of the Gujarat High Court ought not to be followed by this Court. The Tribunal rightly set aside the penalty imposed on the respondent and also the demand imposed on the respondent under Rule 8(3A) - no substantial question of law arises for consideration in this Appeal - Appeal dismissed - decided against Revenue.

Issues Involved:
1. Demand of short paid duty of excise.
2. Demand of excise duty in cash for clearances.
3. Demand of short paid duty of excise on specific goods cleared.
4. Adjustment of amounts already paid.
5. Interest on demanded amounts.
6. Imposition of penalties under Section 11AC of the Central Excise Act, 1944.
7. Imposition of penalties under Rule 25 of the Central Excise Rules, 2002.
8. Applicability of Rule 8(3A) of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Demand of Short Paid Duty of Excise:
The Revenue alleged that the respondent short paid duty of ?5,73,721/- and ?42,898/- on certain clearances. The respondent paid these amounts along with interest before the audit findings. The Tribunal found that Rule 8(3A) of the Central Excise Rules, 2002, does not apply to cases where additional amounts are found payable during audit, scrutiny, or investigation. Such demands should be recovered under Section 11A of the Central Excise Act, 1944.

2. Demand of Excise Duty in Cash for Clearances:
The Revenue demanded ?21,72,22,934/- in cash for clearances made from 05.01.2007 to 26.12.2009 under Rule 8(3A). The Tribunal held that Rule 8(3A) applies only to cases where the assessee defaults in payment of excise duty beyond 30 days from the due date. Since the respondent paid the duty before the audit findings, Rule 8(3A) was deemed inapplicable.

3. Demand of Short Paid Duty of Excise on Specific Goods Cleared:
The respondent was found to have short paid ?42,898/- on goods cleared under specific invoices. This amount was paid along with interest before the audit. The Tribunal reiterated that Rule 8(3A) does not cover such cases and demands should be issued under Section 11A.

4. Adjustment of Amounts Already Paid:
The Revenue sought to adjust the amounts already paid by the respondent against the demanded amounts. The Tribunal's decision to set aside the demands under Rule 8(3A) made this adjustment unnecessary.

5. Interest on Demanded Amounts:
Interest was demanded under Section 11AB of the Central Excise Act, 1944, on the amounts of ?5,73,721/-, ?21,72,22,934/-, and ?42,898/-. The Tribunal's ruling that Rule 8(3A) was inapplicable nullified the basis for these interest demands.

6. Imposition of Penalties under Section 11AC of the Central Excise Act, 1944:
A penalty of ?6,16,619/- was imposed for short/default payment of duty. The Tribunal set aside this penalty, stating that Rule 8(3A) did not apply and penalties based on it were unjustified.

7. Imposition of Penalties under Rule 25 of the Central Excise Rules, 2002:
A penalty of ?10,00,000/- was imposed for contravention of provisions of Rules 4, 6, and 8. The Tribunal set aside this penalty for similar reasons, emphasizing that Rule 8(3A) was not applicable.

8. Applicability of Rule 8(3A) of the Central Excise Rules, 2002:
The Tribunal held that Rule 8(3A) applies only to cases where the assessee defaults in payment of excise duty beyond 30 days from the due date. It does not apply to cases where additional amounts are found payable during audit or scrutiny. The Tribunal also noted that the Gujarat High Court had declared Rule 8(3A) ultra vires, and despite a stay by the Supreme Court, the ratio of the Gujarat High Court's judgment was followed by other High Courts.

Conclusion:
The Tribunal's decision to set aside the demands and penalties under Rule 8(3A) was upheld. The High Court dismissed the appeal, agreeing that no substantial question of law arose. The Tribunal's findings that the respondent's case was a demand under Section 11A and not covered by Rule 8(3A) were affirmed. The appeal was dismissed with no order as to costs.

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