2019 (6) TMI 259 - AT - Central Excise

Tribunal rules in favor of appellant in central excise duty default case

The Appellate Tribunal CESTAT ALLAHABAD ruled in favor of the appellant in a case concerning an allegation of default in payment of central excise duty ... Bar on utilization of CENVAT credit - vires of Rule 8(3A) of Central Excise Rules, 2002 - HELD THAT:- Hon’ble Gujarat High court in the said case of ADVANCE SURFACTANTS INDIA LTD VERSUS UNION OF INDIA [2017 (8) TMI 594 - GUJARAT HIGH COURT] has held that there is no one to one co-relation between raw material and finished goods and therefore to restrict utilization of credit earned up to the last date of duty payment is contrary to the principals of Cenvat Credit Rules and therefore the Hon’ble High Court has held that Sub-Rule (4) of Rule 3 of Cenvat Credit Rules, 2004 is ultra vires. The default remained only from 05 March, 2008 to 12 March, 2008 - further during the period from 05 March, 2008 to 12 March, 2008 there was no payment of central excise duty through debit of cenvat credit. Therefore, in both the appeals there were no grounds to invoke provisions of Rule 8(3A) of Central Excise Rules. Appellants shall be entitled to refund of ₹ 1,80,764/- paid in cash on 07 October, 2008 along with applicable interest - appeal allowed. Issues:Allegation of default in payment of central excise duty from February 2008 to August 2008; Interpretation of Rule 8(3A) of Central Excise Rules, 2002; Admissibility of cenvat credit debited for payment of duty; Applicability of the ruling of Hon'ble Gujarat High Court in Advance Surfactants India Ltd. case.Analysis:The judgment by the Appellate Tribunal CESTAT ALLAHABAD dealt with two appeals related to an allegation of default in payment of central excise duty from February 2008 to August 2008. The case involved the interpretation of Rule 8(3A) of Central Excise Rules, 2002, and the admissibility of cenvat credit debited for payment of duty. The appellant, engaged in manufacturing machinery parts, faced a show cause notice for default in duty payment. The first appeal (139 of 2011) covered the period from February to May 2008, while the second appeal (138 of 2011) pertained to June to August 2008.In the adjudication process, the Order-In-Appeal confirmed the proposals in the show cause notices and imposed penalties, leading to appeals before the Commissioner (Appeals). The Commissioner reduced the penalty but upheld the demand, resulting in further appeals before the Tribunal. The appellant argued that the debit made on 15 February 2008 was proper and in accordance with the law, as per the ruling of the Hon'ble Gujarat High Court in a similar case. The appellant contended that there was no default beyond 12 March 2008 and challenged the invocation of Rule 8(3A) of Central Excise Rules.The Revenue argued for time to ascertain the status of an appeal filed before the Hon'ble Supreme Court against the Gujarat High Court's ruling. The appellant submitted that while the Supreme Court had admitted the appeal, no stay was granted on the High Court's decision. The Tribunal, after reviewing the case records and submissions, applied the Gujarat High Court's ruling to the present case. It held that the debit made on 15 February 2008 was lawful, and the default existed only from 5 March 2008 to 12 March 2008. As no duty payment occurred through cenvat credit during that period, the Tribunal found no grounds to invoke Rule 8(3A) of Central Excise Rules. Consequently, the Tribunal set aside both impugned orders, allowing the appeals and granting the appellant a refund of the duty paid in cash on 7 October 2008, along with applicable interest.