2016 (8) TMI 1102 - AT - Central Excise

Tribunal overturns duty demand and penalty, citing unconstitutionality of Rule 8(3A)

The Tribunal allowed the appeal in favor of the appellant, a loss-making company facing financial hardship. The demand of duty under Rule 8(3A) was deemed ... Demand of duty - Rule 8(3A) of Central Excise Rules, 2002 - Held that:- we find that the Tribunal by following the judgements of the Hon'ble Gujarat and Hon'ble Madras High Courts held that demand of duty under Rule 8(3A) is unsustainable. Both the Hon'ble Gujarat High Court and Madras High Court have held that condition contained in Rule 8 (3A) of Central Excise Rules 2002 for payment of duty 'without utilisation of cenvat credit' is contrary to the scheme of availment of cenvat credit under CCR and the said Rule 8(3A) is arbitrary and violative of Article 14 of the Constitution. Accordingly, the Hon'ble High Court has struck down the Rule 8(3A) as unconstitutional. Therefore, in view of the same, the impugned order is set aside. - Decided in favour of appellant with consequential relief Issues Involved:- Early hearing application for appeal- Demand of duty under Rule 8 (3A) of Central Excise Rules 2002- Financial hardship to the company due to disallowance of duty payment through Cenvat credit- Settlement of the issue in favor of the appellant in a batch of appealsAnalysis:Early Hearing Application for Appeal:The applicant filed a miscellaneous application for early hearing of the appeal, citing financial hardship faced by the company. The appellant, a loss-making company struggling to pay its employees' salaries, highlighted the difficulty caused by disallowing payment of duty through Cenvat credit. The issue was settled in a batch of appeals, including the present appellant, by the Chennai Bench of the Tribunal. The appellant requested early disposal of the appeal based on the settled position.Demand of Duty under Rule 8 (3A) of Central Excise Rules 2002:After hearing both sides and considering the settled position in favor of the appellant, the Tribunal took up the appeal for hearing and disposal. The Tribunal referred to judgments of the Gujarat High Court and Madras High Court, which held that the condition in Rule 8 (3A) for payment of duty 'without utilization of Cenvat credit' was contrary to the scheme of Cenvat credit availment and violative of Article 14 of the Constitution. Both High Courts had struck down Rule 8(3A) as unconstitutional, making the demand of duty under this rule unsustainable.Financial Hardship and Settlement of the Issue:The Tribunal, in line with the judgments of the High Courts, held that the demand of duty and penalty imposed under Rule 8(3A) were unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief. The Tribunal's decision was based on the binding ruling of the Madras High Court and the settled position in similar appeals. The miscellaneous application for early hearing was also disposed of in light of the discussions and the final decision of the Tribunal.This detailed analysis of the judgment highlights the key issues of early hearing application, demand of duty under Rule 8 (3A), financial hardship faced by the company, and the settlement of the issue in favor of the appellant based on the decisions of the High Courts and the Tribunal.