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2025 (3) TMI 1447 - AT - Central ExciseDenial of utilization of CENVAT Credit for payment of duty during the defaulted period in terms of Rule 8(3A) of Central Excise Rules 2002 - levy of interest and penalty - HELD THAT - Hon ble High Court in 2024 (7) TMI 814 - CALCUTTA HIGH has held that matter should be kept pending and is to be taken only after the Special Leave to Appeal No. 16523/2015 is decided by the Hon ble Apex Court. However during the course of hearing it has been brought to the knowledge of the Bench that the Hon ble Supreme Court has already disposed of the matter and the Department has already withdrawn the appeal. The issue in the case of Indsur Global Ltd. has already been decided by the Hon ble Supreme Court. In these circumstances it is found that the issue is presently not pending before the Hon ble Supreme Court. Thus in our view there is no bar in taking up the issue for a decision based on the available documents. Considering the fact that the provisions of Rule 8(3A) of Central Excise Rules 2002 have been declared ultra vires by the Hon ble Gujarat High Court in the case of Indsur Global Ltd. and also by the Hon ble Punjab and Haryana High Court in the case of Sandley Industries 2015 (10) TMI 2455 - PUNJAB HARYANA HIGH COURT the CENVAT Credit cannot be denied to the appellant for utilization in payment of duty during the defaulted period. Thus there is no infirmity in utilization of CENVAT Credit for payment of duty during the defaulted period. Conclusion - Since the denial of utilisation of CENVAT Credit by invoking Rule 8(3A) of the Central Excise Rules 2002 has been declared ultra vires by Courts utilisation of CENVAT Credit during the impugned period by the appellant was not irregular. Accordingly no amount can be demanded from the appellants either for using the CENVAT accruals of subsequent months or for using the CENVAT account for payment of duty during the said period for the alleged contravention of Rule 8(3A) of the Central Excise Rules 2002. The demand confirmed in the impugned order by denying the payment made by the appellant through CENVAT Credit is not sustainable and accordingly the same is set aside - Since the demand raised against the appellant does not survive the question of demanding interest or imposing penalty does not arise. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this appeal was whether the appellant, M/s. Kunj Bihari Steels Private Limited, could be denied the utilization of CENVAT Credit for payment of duty during a defaulted period as per Rule 8(3A) of the Central Excise Rules, 2002. The Tribunal also examined the validity of the demand for central excise duty confirmed against the appellant and the imposition of interest and penalties. ISSUE-WISE DETAILED ANALYSIS Legal Framework and Precedents: The case centered around Rule 8(3A) of the Central Excise Rules, 2002, which mandates that in the event of default in duty payment, the assessee must pay duty consignment-wise without utilizing CENVAT Credit until the default is rectified. The appellant argued that this rule was declared ultra vires by the Hon'ble Gujarat High Court in Indsur Global Ltd. v. Union of India, and similarly by the Punjab and Haryana High Court in Sandley Industries v. Union of India. The Supreme Court had disposed of the related appeals as not pressed, indicating no pending challenge to these rulings. Court's Interpretation and Reasoning: The Tribunal noted that the Hon'ble Gujarat High Court and the Punjab and Haryana High Court had declared Rule 8(3A) ultra vires. The Tribunal emphasized that the Supreme Court's disposition of related appeals further supported the view that the rule could not be enforced to deny CENVAT Credit utilization. Key Evidence and Findings: The Tribunal reviewed the appellant's compliance with duty payments, noting that the appellant had paid a portion by cheque and the remainder through CENVAT Credit. The impugned order had treated the CENVAT Credit utilization as inadmissible based on Rule 8(3A). However, given the judicial declarations of the rule's invalidity, the Tribunal found no legal basis to support the denial of credit utilization. Application of Law to Facts: Applying the judicial precedents, the Tribunal concluded that the appellant's utilization of CENVAT Credit during the defaulted period was lawful. The Tribunal determined that the demand for duty, interest, and penalties based on the alleged contravention of Rule 8(3A) was unsustainable. Treatment of Competing Arguments: The Revenue's argument for upholding the demand was based on the impugned order's findings. However, the Tribunal found these arguments unpersuasive in light of the higher courts' rulings declaring Rule 8(3A) ultra vires. The Tribunal aligned its decision with the prevailing judicial interpretation, rejecting the Revenue's position. Conclusions: The Tribunal concluded that the appellant's utilization of CENVAT Credit was valid and that the demand for duty, interest, and penalties could not be sustained. Consequently, the Tribunal set aside the impugned order and allowed the appeal. SIGNIFICANT HOLDINGS The Tribunal held that Rule 8(3A) of the Central Excise Rules, 2002, being declared ultra vires, could not be invoked to deny CENVAT Credit utilization. The core principle established was that judicial declarations of a rule's invalidity preclude its enforcement, thereby protecting the appellant's rights to utilize CENVAT Credit. Final Determinations on Each Issue: The Tribunal set aside the demand for duty, interest, and penalties, affirming that the appellant's actions were compliant with the law as interpreted by relevant judicial authorities. The appeal was allowed, granting the appellant consequential relief as per law.
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