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TMI Blog2015 (10) TMI 2455X X X X Extracts X X X X X X X X Extracts X X X X ..... d is arbitrary and confiscatory in nature. Further direction has been sought to the respondents not to adjudicate show cause notice issued to the petitioner during the pendency of the writ petition. 3. A few facts relevant for the decision of the controversy involved as narrated in CWP No.10564 of 2014 may be noticed. The petitioner is engaged in the manufacture of zinc and zinc ash falling under Chapter heading 7901100 and 26201900 of the First Schedule to Central Excise Tariff Act, 1985. The raw material used by the petitioner is zinc dross, zinc scrap and zinc blowing. The raw material as well as finished goods are subject to Central Valued Added Tax (CENVAT). The petitioner is availing CENVAT Credit in terms of CENVAT Credit Rules, 2004 (in short, "the 2004 Rules"). The value addition involved is very low as major part of duty is paid from CENVAT. The petitioner is also importing goods. It gets more input credit than duty payable on finished goods apart from basic customs duty. As per Section 3 of the Central Excise Act, 1944 (in short, "the Act"), duty of excise called as CENVAT is leviable on goods produced and manufactured in India. As per Rule 4 of the 2002 Rules, every pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut a sum of Rs. 90,510/- was paid short. This fact came to the knowledge of the petitioner when an official of the respondents pointed out about the same. The petitioner immediately deposited the said amount alongwith interest. The petitioner vide GAR 7 dated 31.10.2013 deposited a sum of Rs. 90510/- towards duty and Rs. 16292/- towards interest. Inspite of deposit of duty alongwith interest, the respondent relying upon Rule 8(3A) of the 2002 Rules formed an opinion that the petitioner had delayed payment of duty so it was barred from paying duty from CENVAT account. Show cause notice dated 4.11.2013, Annexure P.4 was issued to the petitioner for recovery of Central excise duty, interest and penalty by treating Rs. 29,27,888/- as not paid for the month of December 2012. Similarly, another show cause notice dated 20.12.2013, Annexure P.5 was also issued to the petitioner on the ground that the petitioner had wrongly utilized CENVAT Credit amounting to Rs. 1,87,21,250/- during January 2013 to October 2013. According to the petitioner, sub-rule 3A of Rule 8 of 2002 Rules is contrary to the whole scheme of the CENVAT credit. Hence the instant writ petitions. 4. We have heard learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer, Attur, 2014 (305) ELT 404 (Mad.), State of Rajasthan vs. Basant Agrotech (India) Limited, 2014(302) ELT 3 (SC), R.K.Garg and others vs. Union of India (UOI) and others, (1982) 133 ITR 239 (SC), P.H. Ashwathanarayana Setty and others vs. State of Karnataka and others, AIR 1989 SC 100, Shri Krishna Das vs. Town Area Committee, Chirgaon, AIR 1991 SC 2096 and Indsur Global Limited's case (supra). 7. We do not find any substance in the submissions of learned counsel for the revenue. 8. Un-amended and amended Rule 8(3A) of 2002 Rules reads thus:- Rule 8(3A) (unamended) "(3A) If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; has not been defined in the statute, the concept is not an unknown one. Section 11AC of the Central Excise Act provides for penalty in case of non-levy, short levy or non-payment or short payment or erroneous refund of the duty where the same is occasioned by reason of fraud or collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of the Act or the rules made thereunder with an intent to evade payment of duty. Likewise, section 11A which pertains to recovery of duties not levied or not paid or short levied or short paid or erroneously refunded makes a clear distinction when it gives the period of limitation available to the department to institute proceedings, in such cases between such non-payment having been occasioned due to fraud, collusion, etc. in which case a longer period of limitation is available as against rest of the cases. Likewise, under rule 12CC of the Central Excise Rules as it stood at the relevant time, power was given to the Government by notification to withdraw facilities from the manufacturers, registered dealers or exporters under certain circumstances having regard to the extent of evasion of duty, nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs which are duty paid. It is the duty element which the assessee has already suffered which is credited to his CENVAT credit account available to him for adjustment for payment of excise duty liability upon clearance of the finished product. If such facility is withdrawn, it could be appreciated, his ability to continue the business under such adverse financial climate would further diminish. This would be a cyclical vicious pattern where in every month he would fall behind by the due date unable to raise cash flow for payment of duty for the clearance which he desires to make and is therefore further saddled with the burden of paying such duty in cash without availing CENVAT credit. This rule thus imposes a wholly unreasonable restriction which is not commensurate with the wrong sought to be remedied. 31. This extreme hardship is not the only element of unreasonableness of this provision. It essentially prevents an assessee from availing CENVAT credit of the duty already paid and thereby suspends, if not withdraws, his right to take credit of the duty already paid to the Government. It is true that such a provision is made because of peculiar circumstances the assessee lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, beyond what is required in the interests of the public. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19 (1)(g) and the social control permitted by clause (6) of Article 19, it must be held to be wanting in that quality. 33. In the case of Om Kumar (supra), the Supreme Court recognized the applicability of the principle of proportionality in judging the validity of a provision on the touchstone of reasonableness under Article 14 of the Constitution. It was observed: "53. Now under Art. 19(2) to (6), restrictions on fundamental freedoms can be imposed only by legislation. In cases where such legislation is made and the restrictions are reasonable yet, if the concerned statute permitted the administrative authorities to exercise power or discretion while imposing restrictions in individual situations, question frequently arises whether a wrong choice is made by the Administrator for imposing restriction or whether the Administrator has not properly balanced the fundamental right and the need for the restriction or whether he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out utilizing the CENVAT credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion "without utilizing the CENVAT credit" of sub-rule (3A) of rule 8 of the Central Excise Rules, 2002, shall be rendered invalid." 11. Similar view was reiterated in a later decision by the Gujarat High Court in Precision Fasteners Limited's case, (supra). 12. Further, the Madras High Court in M/s Malladi Drugs & Pharmaceuticals Limited's case, following the judgments of Gujarat High Court, recorded thus:- "5. It is not the case of the Department in this batch of writ petitions that the petitioners-assessees have illegally or irregularly taken the CENVAT credit. It is to be mentioned herein that sub-rule (1) of Rule 8 provides for the manner of payment of duty on the goods removed from the factory or the warehouse as provided thereunder. Sub-rule (2) of Rule 8 extends the benefit of duty to the third party purchaser, who buys the excisable goods removed by the assessee and such goods are deemed to have suffered duty of excise. Under subrule (3) of Rule 8, interest is liable to be paid on the outstanding amount, if the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at taxation laws must pass the test of Article 14 of the Constitution of India and that there should be a reasonable classification which should bear a nexus with the object sought to be achieved. In Basant Agrotech (India) Limited's case (supra), it was observed by the Apex Court that no tax can be imposed by inference or by analogy or by trying to probe intentions of legislature and by considering what was substance of the matter. Court cannot import provisions in statutes so as to supply any assumed deficiency. In R.K.Garg's case (supra), the Supreme Court noted that since test of reasonableness was not passed as required under Article 14, the Act and the ordinance were invalid as both infringed Article 14 of the Constitution. In P.M.Ashwathanarayana Setty's case (supra), the Apex Court was dealing with the imposition of court fees and it was noted that it shall be considered on comprehensive level of services against totality of receipts. In Shri Krishna Das's case (supra), the Apex Court was considering the issue of imposing weighing dues on goods mentioned in the bye-laws. It was held that it is not for the court to question it on the ground that some similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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