Tribunal sets aside duty demand, interest, and penalty, allowing use of cenvat credit for duty payment

The Tribunal allowed the appeal, setting aside the duty demand, interest, and penalty imposed on the appellant for not paying the balance Central Excise duty in cash during a default period. Relying on High Court decisions declaring Rule 8 (3A) as ultra vires, the Tribunal concluded that accumulated cenvat credit could be used for duty payment even during default. The decision aligned with the Calcutta High Court's ruling, granting relief to the appellant and clarifying the interpretation of Rule 8 (3A) of the Central Excise Rules, 2002.

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Issues:
Interpretation of Rule 8 (3A) of the Central Excise Rules, 2002 regarding payment of Central Excise duty during default period using cenvat credit.

Analysis:

The judgment pertains to a case where the appellant, a manufacturer of excisable goods, utilized cenvat credit for discharging part of their duty liability during 2012-13 & 2013-14. However, the balance amount, which needed to be paid in cash, was not paid by the due date, resulting in default for payment of Central Excise duty. The Revenue contended that during the default period, duty on goods cleared on consignment basis should have been paid in cash without using the cenvat credit. A Show-Cause Notice was issued, and upon adjudication, duty demand along with interest and a penalty were imposed. The Commissioner (Appeals) upheld the order, leading to the appeal before the Tribunal.

The appellant argued that Rule 8 (3A) of the Central Excise Rules, 2002, under which the duty demand was raised, had been declared ultra vires by various High Courts. They cited multiple decisions supporting this argument. The appellant contended that there was no prohibition on using accumulated cenvat credit for paying Central Excise duty during the default period, based on the decisions of the High Courts.

The Revenue acknowledged that the issue of Rule 8 (3A) had been decided against them by various High Courts, but they had challenged these decisions in the Supreme Court. The Supreme Court had admitted the Special Leave Petitions (SLP) and stayed the operation of the High Court decisions. Therefore, the Revenue requested to keep the issue pending until the Supreme Court's final decision.

After considering the arguments and examining the decisions cited by the appellant, the Tribunal noted that the Jurisdictional High Court at Calcutta had declared a portion of Rule 8 (3A) as ultra vires. Following this precedent, the Tribunal concluded that there was no restriction on using accumulated cenvat credit for paying Central Excise duty even during the default period. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential benefits.

In conclusion, the Tribunal's judgment clarified the interpretation of Rule 8 (3A) of the Central Excise Rules, 2002, allowing the use of accumulated cenvat credit for discharging Central Excise duty during a default period. The decision was based on the jurisprudence of various High Courts, including the Jurisdictional High Court at Calcutta, and provided relief to the appellant in this case.

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