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Appellate Tribunal Invalidates Unconstitutional Excise Duty Penalty The appellate tribunal set aside the penalty imposed on the appellant for default in excise duty payment beyond the due date, as it was based on a rule ...
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The appellate tribunal set aside the penalty imposed on the appellant for default in excise duty payment beyond the due date, as it was based on a rule deemed unconstitutional by the High Court. The penalty of &8377; 6 lakhs was invalidated, and the appeal was allowed in favor of the appellant.
Issues: Appeal against Order-in-Appeal upholding order-in-original with reduced penalty under Rule 25(1) of Central Excise Rules, 2002 for default in excise duty payment beyond due date.
Analysis: 1. The appellant defaulted in monthly excise duty payments, paid belatedly beyond 30 days from due date. The original adjudicating authority confirmed duty demand paid through CENVAT Credit during default period under Rule 8(3A) of Central Excise Rules, 2002. A penalty of &8377; 18,53,070/- was imposed, later reduced to &8377; 6 lakhs by Commissioner (Appeals).
2. The appellant contended that utilizing CENVAT credit during default period was permissible, citing the judgment of the Hon'ble High Court of Gujarat in Indsur Global Ltd. vs. Union of India. Another judgment of the Gujarat High Court in Precision Fasteners Ltd. vs. Commissioner of Central Excise supported this view, striking down proceedings under Rule 8(3A) as unconstitutional.
3. The Revenue supported the findings of the impugned order, upholding the penalty. However, the appellate tribunal noted that the penalty was imposed based on Rule 8(3A), which was deemed unconstitutional by the Gujarat High Court, rendering the penalty invalid. The duty was paid with interest, and as per the precedents, the penalty did not hold ground.
4. Consequently, the tribunal set aside the penalty of &8377; 6 lakhs imposed under Rule 25 of the Central Excise Rules, 2002, allowing the appeal in favor of the appellant. The judgment was pronounced on 6.5.2015.
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