2023 (8) TMI 657 - AT - Central Excise

Constitutional Validity of Sub-Rule 3A of Rule 8 of the Central Excise Rules, 2002 - Recovery of short paid Central Excise duty alongwith interest and penalty - HELD THAT - This issue is no more res-integra as the various Hon ble High Courts have held that the provisions of Sub-Rule 3A of Rule 8 of the Central Excise Rules, 2002 are unconstitutional. In this regard, reliance upon the Jurisdictional High Court of Punjab and Haryana in the case of M/S SANDLEY INDUSTRIES VERSUS UNION OF INDIA AND OTHERS 2015 (10) TMI 2455 - PUNJAB HARYANA HIGH COURT wherein it has been held that we hold that Rule 8(3A) of the 2002 Rules to the extent it contains the words without utilizing the Cenvat credit is held to be arbitrary and unreasonable and is struck down. In other words, the unamended Rule 8(3A) of 2002 Rules whereby the benefit of Cenvat credit for all the period till the actual payment was made, stands disallowed in the event of a minor default also is arbitrary and unreasonable. Thus, there is no infirmity in the impugned order which is upheld by dismissing the appeal of the Revenue.

Summary

Issues:
The issues involved in the judgment are non-filing of ER-1 return, clearance of goods without payment of duty, eligibility to utilize Cenvat Credit, recovery of short paid Central Excise duty, disallowance of Cenvat Credit, interest, and penalty.

Non-filing of ER-1 return and Clearance of Goods Without Payment of Duty:
The Respondent, engaged in furniture manufacturing, failed to file ER-1 return by the stipulated date, cleared goods without duty payment from PLA, and did not meet the conditions to utilize Cenvat Credit, leading to a Show Cause Notice for recovery of short paid Central Excise duty amounting to 1,00,98,054/-. The penalty was also proposed under relevant rules.

Eligibility to Utilize Cenvat Credit and Recovery of Short Paid Central Excise Duty:
The Respondent claimed to have filed all returns and deposited duty and interest as required by Rule 8 of the Central Excise Rules 2002. The Adjudicating Authority dropped the demand of Central Excise duty and allowed Credit, which was challenged by the Revenue in the present appeal.

Interpretation of Rule 8(3A) of the Central Excise Rules 2002:
The Revenue argued that the demand of Central Excise duty and allowance of Credit was incorrect due to the violation of Rule 8(3A), which mandates payment of duty without utilizing Cenvat Credit in case of default. The Respondent cited High Court decisions declaring Rule 8(3A) as unconstitutional, allowing payment through PLA.

Decision and Rationale:
After reviewing submissions and relevant decisions, the Tribunal upheld the impugned order, citing various High Court judgments declaring Rule 8(3A) unconstitutional. The Tribunal emphasized that no liability arises under the said Rules due to their unconstitutionality, as observed in previous cases. The appeal of the Revenue was dismissed based on the jurisprudence cited.