2024 (8) TMI 1492 - AT - Central Excise

Default in payment of duty beyond thirty days from the due date as prescribed in sub rule (1) of Rule 3 of Cenvat credit Rules 2004 - Violation of Rule 8(3A) of Central Excise Rules 2002 - main argument of appellant is that Rule 8(3A) of Central Excise Rules, 2002 has been struck down as unconstitutional by the Hon ble High Courts and therefore the confirmation of demand cannot sustain - HELD THAT - The Hon ble High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 2014 (12) TMI 585 - GUJARAT HIGH COURT has struck down Rule 8(3A) as unconstitutional on the ground that the prescribed Rule which says that the duty has to be paid without using the Cenvat credit is arbitrary and infringement of substantive right of Cenvat credit. The Hon ble High Court in the case of M/S. MALLADI DRUGS PHARMACEUTICALS LTD. VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CENTRAL EXCISE 2015 (5) TMI 603 - MADRAS HIGH COURT had declared the provision to be unconstitutional. Once the provision is declared by any High Court as unconstitutional then the said provision is non-existent. The demand cannot sustain. In the result, the impugned order is set aside - The appeal is allowed.

Summary

Issues:
Violation of Rule 8(3A) of Central Excise Rules 2002 leading to demand of duty, interest, and penalties for non-payment of excise duty on time.

Analysis:
The appellant, engaged in manufacturing parts of motor vehicles, availed Cenvat Credit for excise duty payments. However, scrutiny revealed delays in duty payments for June 2013 and subsequent months, with partial payments made using Cenvat account. The department alleged contravention of Rule 8(3A) of Central Excise Rules 2002, treating goods as cleared without duty payment, triggering penalties under Section 11AC and Rule 25.

The appellant contested the demand, citing the unconstitutionality of Rule 8(3A) based on judgments from various High Courts. The High Courts of Gujarat and Madras, along with the Bombay High Court, declared Rule 8(3A) unconstitutional, emphasizing the infringement of substantive rights regarding Cenvat credit. Notably, the Hon'ble Supreme Court dismissed an appeal against the Gujarat High Court's decision, reinforcing the unconstitutionality of the rule.

Moreover, the Tribunal referred to a case where a demand/penalty under Rule 8(3A) was set aside, supporting the appellant's argument. Relying on the judgments of multiple High Courts, the Tribunal concluded that the demand was unsustainable, setting aside the penalties imposed. The Tribunal emphasized that when multiple High Courts declare a provision unconstitutional, it becomes non-existent, leading to the allowance of the appeal and the setting aside of the impugned order.

In light of the above analysis and legal precedents, the Tribunal allowed the appeal, setting aside the demand, interest, and penalties imposed. The decision was based on the unconstitutionality of Rule 8(3A) as established by various High Court judgments, leading to the conclusion that the demand could not be sustained.

This detailed analysis highlights the legal intricacies surrounding the violation of Rule 8(3A) of the Central Excise Rules 2002 and the subsequent legal arguments and judgments that influenced the final decision of setting aside the demand and penalties.