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TMI Blog2014 (12) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, Sub rule (3A) of Rule 8 of the Central Excise Rules, 2002, provides that the assessee would pay excise duty on every individual clearance and that such payment would be without availing Cenvat Credit available in the accounts of the assessee. It is undisputed that the duty demands under challenge as well as the impugned show cause notice arise out of this background and the department relies primarily on Sub rule (3A) of Rule 8 of the Central Excise Rules, 2002. 3. In a judgment dated 26-27/11/2014 in Special Civil Application No.3344 of 2014 in case of Indsur Global Ltd. v. Union of India, this Court considered a similar challenge of the petitioner to the vires of Sub rule (3A) of Rule 8 of the Central Excise Rules, 2002. Portion of the said rule which provides that the assessee would clear the goods on payment of excise duty "without utilizing cenvat credit" to the extent the group of words indicated in the inverted comma were declared ultra vires and unconstitutional. It was observed as under: "29. This brings us to the last limb of the petitioner's contention, namely, that the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of duty, where a portion of sale price, in excess of invoice price, is received by him or on his behalf but not accounted for in the books of account; (c) taking of CENVAT credit without the receipt of goods specified in the document based on which the said credit has been taken; (d) taking of CENVAT credit on invoices or other documents which a person has reasons to believe as not genuine; (e) issue of excise duty invoice without delivery of goods specified in the said invoice; (f) claiming of refund or rebate based on the excise duty paid invoice or other documents which a person has reason to believe as not genuine." This rule 12CC as well as the notification issued by the Government would apply to special class of assessees who through their conscious act tried to evade duty. 30. It can be seen that the reasons for non payment of excise duty can be manifold and not necessarily in all cases have to be willful default by an assessee despite availability of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a provision. As held by the Supreme Court in the case of Eicher Motors Ltd (supra) an assessee would be entitled to take credit of input already used by the manufacturer in the final product. In the said case, the Supreme Court was dealing with rule 57F which was introduced in the Central Excise Rules, 1944 under which credit lying unutilized in the Modvat credit account of an assessee on 16th March 1995 would lapse. Such provision was questioned. The Supreme Court held that since excess credit could not have been utilized for payment of the excise duty on any other product, the unutilised credit was getting accumulated. For the utilization of the credit, all vestitive facts or necessary incidents thereto had taken place prior to 16.3.1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory of the manufacturer of the final product and the final product which had been cleared from the factory was sought to be lapsed. The Supreme Court struck down the rule further observing that if on the inputs the assessee had already paid the taxes on the basis that when the goods are utilized in the manufacture of furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountry, in our view, has to be tested on the principle of ''proportionality,' just as it is done in the case of the main legislation. This, in fact, is being done by our Courts." 34. By no stretch of imagination, the restriction imposed under subrule (3A) of rule 8 to the extend it requires a defaulter irrespective of its extent, nature and reason for the default to pay the excise duty without availing cenvat credit to his account can be stated to be a reasonable restriction. It leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties. This is quite apart from being wholly reasonable, being irrational and arbitrary and therefore, violative of Article 14 of the Constitution. It prevents him from availing credit of duty already paid by him. It also is a serious affront to his right to carry on his trade or business guaranteed under Article 19(1) (g) of the Constitution. On both the counts, therefore, that portion of subrule (3A) of rule must fail. 35. The situation can be looked at slightly different angle. With or wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenged the show cause notice. In the case of Indsur Global Ltd. (Supra) the petitioner had unsuccessfully challenged the order of the adjudicating authority. The appeal was dismissed by the Commissioner on the ground of delay beyond his power to condone. The Tribunal had dismissed further appeal on the ground of gross delay of three years in preferring the appeal before the Tribunal as also on the ground that in any case the Commissioner was right in not entertaining the appeal of the assessee which was presented along with the application for condonation of delay after the maximum period which the Commissioner could have condoned. It was in this background the Court held that the issues which are closed cannot be reopened. It was noted that there were other proceedings between the same assessee and department pending at various stages on same issue. It was, therefore, provided that the particular order in challenge would not be disturbed but that the benefit of declaration of invalidity of the rule would be available to the petitioner in other pending proceedings. 7. In view of such clear distinction in facts, the modus adopted in the said case in case of Indsur Global Ltd. (S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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