2024 (11) TMI 1339 - AT - Central Excise

Default in payment of duty beyond 30 days from the due dates - bar to utilize the Cenvat Credit - violation of Rule 8(3A) of CCR - Extended period of limitation - penalty - period from January 2011 to March 2014 - HELD THAT - The issue as to whether the Assessee can utilise the CENVAT credit toward payment of duty when in default is no more res integra and many judicial authorities have held that the provision of Rule 8(3A) of Central Excise Rules, 2002 as ultra vires to the Main Act. The Hon ble Gujarat High Court in the case of M/s. Indsur Global Ltd. Vs. UOI 2014 (12) TMI 585 - GUJARAT HIGH COURT struck down the condition in Rule 8(3A) for payment of duty without utilizing the CENVAT credit as unconstitutional and invalid. It is found that the Department had preferred an appeal against the decision passed in Indsur Global Ltd. before the Hon ble Supreme Court. The Ld. Counsel for the appellant has submitted before us that the appeal filed by the Department in Indsur Global Ltd. has been disposed by the Hon ble Apex Court 2024 (7) TMI 1559 - SC ORDER (LB) . The appeal was referred to the Lok Adalat proceedings before the Hon ble Supreme Court and settlement has been arrived at. The effect is that the stay order having merged with the order of settlement, stands vacated. The decision rendered by the Hon ble High Courts of Gujarat and Madras in the above cases would revive and be in force as a precedent. Under such circumstances, the judgements referred by the Ld. AR does not support the cause of revenue. The demand raised alleging violation of Rule 8(3A) cannot sustain and requires to be set aside. Ordered accordingly. Since the demand itself does not sustain, the invocation of extended period and imposition of penalties does not arise - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Whether the demand for violation of Rule 8(3A) against the Appellant is sustainable.
2. Whether the demand can be raised invoking the extending period and imposition of penalty is justified.

Analysis:

The Appellant filed an Excise Appeal challenging Order-in-Original confirming demands for recovery of Cenvat Credit under Rule 14 of Cenvat Credit Rules, 2004. The demands were based on the Appellant's alleged default in payment of duty and belated filing of returns on a quarterly basis, exceeding the exemption limit for SSI units. The department issued a Show Cause Notice seeking recovery of wrongly utilized Cenvat credit, interest, and penalties. The adjudicating authority confirmed the demands and imposed penalties. The Appellant contended that the demand was not sustainable as per CBEC Circular and Supreme Court rulings. They argued that Rule 8(3A) was unconstitutional, citing various High Court decisions. The Appellant also challenged the imposition of penalties without proof of fraud. The Ld. Counsel relied on Tribunal orders and High Court judgments supporting the Appellant's position.

The main issue was whether the Appellant, who defaulted in duty payment, was bound by Rule 8(3A) requiring payment from PLA account when barred from using CENVAT credit. The department argued that the demand was justified due to the Appellant's exceeding exemption limits. However, various judicial authorities had held Rule 8(3A) as ultra vires, including the Hon'ble Gujarat High Court. The Tribunal noted that the Department's appeal against the Gujarat High Court decision was settled, rendering the High Court judgments as precedent. Following the decisions, the Tribunal held that the demand based on Rule 8(3A) was unsustainable and set it aside, leading to the dismissal of extended period invocation and penalties.

In conclusion, the Tribunal set aside the impugned Order-in-Original, allowing the appeal with consequential relief. The judgment emphasized the unenforceability of demands based on Rule 8(3A) and the absence of grounds for penalties. The decision was pronounced in open court on the specified date.