2017 (10) TMI 551 - AT - Central Excise

Appeal allowed, impugned order set aside, penalty invalidated due to stay order.

M/s. Kalson Automotives Pvt. Limited Versus Commissioner of Central Excise & ST, Faridabad

M/s. Kalson Automotives Pvt. Limited Versus Commissioner of Central Excise & ST, Faridabad - TMI Issues:1. Imposition of penalty and demand for interest on the appellant for default in duty payment.2. Validity of Rule 8(3A) of Central Excise Rules, 2002.3. Applicability of judgments by various High Courts and the Supreme Court on the matter.4. Effect of stay orders on legal judgments.Detailed Analysis:1. The appellant appealed against an order imposing a penalty of Rs. 10 Lakh and demanding interest for delayed duty payment. The appellant failed to pay duty from Sep 2008 to June 2009 on time, eventually paying in August 2009 partly through Cenvat account and partly through PLA. A show cause notice was issued for denying Cenvat credit account utilization during the default period, resulting in interest demand and penalty imposition. The penalty was reduced to Rs. 10 Lakh on appeal, leading to the current appeal.2. The appellant argued that Rule 8(3A) of Central Excise Rules, 2002 was declared ultra-virus by the Gujarat High Court in a specific case, making the interest demand and penalty imposition invalid. However, the respondent contended that the decision was stayed by the Supreme Court, allowing interest demand and penalty imposition for the default period. The issue centered on the validity and applicability of Rule 8(3A) in the context of the appellant's case.3. Various High Courts and the Supreme Court had different judgments on the matter. The Gujarat High Court found Rule 8(3A) unreasonable and violative of the constitution, a view upheld by other High Courts. The Delhi High Court cited these judgments, emphasizing the importance of the Gujarat High Court's decision unless overturned by the Supreme Court. The Delhi High Court concluded that the impugned order and CESTAT's reasoning aligned with existing views, leading to dismissal of appeals.4. The effect of stay orders on legal judgments was discussed, highlighting that staying a judgment does not erase its reasoning. The Delhi High Court clarified that a stay order does not nullify the underlying judgment's basis, indicating that the judgment remains valid until overturned. This clarification was crucial in determining the validity and applicability of the judgments in the appellant's case.In conclusion, the appeal was allowed, setting aside the impugned order based on the Delhi High Court's observations and the existing legal precedents. The detailed analysis covered the issues of penalty imposition, Rule 8(3A) validity, conflicting judgments, and the impact of stay orders on legal decisions, providing a comprehensive understanding of the judgment's intricacies and legal implications.