Cenvat credit during excise duty default remains usable where Rule 8(3A) is treated as unconstitutional.

Rule 8(3A) of the Central Excise Rules, 2002 was treated as unconstitutional in the cited High Court line of authority, and the Tribunal applied that view to hold that excise duty could be paid through cenvat credit even during the default period. On that basis, the further demand for reversal of credit and the penalty did not survive, while the liability was confined to interest as reflected in the Commissioner (Appeals) order. The Revenue's challenge therefore failed and the relief granted to the assessee was sustained.

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Issues: Whether, on default in payment of excise duty, utilisation of cenvat credit for subsequent clearances was barred by Rule 8(3A) of the Central Excise Rules, 2002 and whether the demand, interest and penalty were sustainable.

Analysis: The appeal turned on the effect of Rule 8(3A) of the Central Excise Rules, 2002. The order notes that the provision had been declared unconstitutional by the High Court of Gujarat and that other High Courts had followed that view. It also records that payment of duty through cenvat credit, even during the defaulted period, had been held not to be in violation of Rule 8(3A). Following those decisions, the Tribunal found no infirmity in the Commissioner (Appeals) order, which had restricted the liability to interest and had set aside the penalty and the further demand for reversal of credit.

Conclusion: The utilisation of cenvat credit during the defaulted period was not held to be invalid, and the Revenue's challenge to the order granting relief to the assessee failed.

Final Conclusion: The assessee's relief was sustained and the Revenue's appeal was rejected.

Ratio Decidendi: Where Rule 8(3A) is treated as unconstitutional, payment of excise duty through cenvat credit during the default period cannot be denied, and consequential demand and penalty do not survive on that basis.

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