2024 (12) TMI 7 - AT - Central Excise

Default in timely payment of duty on goods cleared - Contravention of Rule 8(3A) of the Central Excise Rules, 2002 (Rules) - extended period of limitation - penalty - period from April 2011 to July 2011 and August 2011 to December 2011 - doctrine of merger - 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 ultravires 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 in UNION OF INDIA ORS. VERSUS INDSUR GLOBAL LTD. 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. 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 in law?
2. Whether the demand invoking the extended period and imposition of penalty is justified?

Analysis:

Issue 1:
The main issue in the appeal is whether the Appellant, who failed to make full payment of duty within the prescribed time limit under Rule 8 of Central Excise Rules, 2002, and defaulted in payment of excise duty, is bound by Rule 8(3A) of the same Rules. Rule 8(3A) mandates that if an assessee defaults in duty payment beyond 30 days, they must pay excise duty in cash without utilizing CENVAT credit until the outstanding amount is paid. The Appellant was alleged to have defaulted in duty payment for specific periods. The department contended that the Appellant was not eligible to use CENVAT credit for payment due to non-compliance with Rule 8(3A).

Judicial Precedents:
Several judicial authorities have held Rule 8(3A) as ultra vires to the main Act. The Gujarat High Court in the case of M/s. Indsur Global Ltd. struck down the provision of paying duty "without utilizing the CENVAT credit" as unconstitutional. This decision was followed by other High Courts in subsequent cases.

Decision:
Considering the settled legal position and precedents, the Tribunal held that the demand based on the violation of Rule 8(3A) cannot be sustained and must be set aside. Consequently, the invocation of the extended period and imposition of penalties were deemed unnecessary due to the lack of sustainable demand.

Issue 2:
Since the demand itself was found unsustainable, the question of justifying the extended period and penalty imposition did not arise, as per the Tribunal's decision.

Conclusion:
The Tribunal set aside the impugned Order-in-Appeal and allowed the appeal with any consequential relief as per the law. The decision was pronounced in open court on the specified date.