Tribunal Overturns Cash Duty Demand; Allows Cenvat Credit Use Under Central Excise Rules, Following Bombay HC Decision.

The Tribunal allowed the appeals, setting aside the impugned order that demanded Central Excise duty in cash and denied Cenvat credit utilization under Rule 8(3A) of the Central Excise Rules, 2002. The Tribunal followed the Bombay HC's decision, deeming the demand unsustainable, and provided consequential relief to the appellant.

---

---

Issues:
Default in monthly payment of duty and denial of utilization of Cenvat credit under Rule 8(3A) of the Central Excise Rules, 2002.

Analysis:
1. The appellant, a manufacturer of LPG Cylinders, failed to pay the Central Excise duties within one month from the due date, leading to the department issuing show cause notices and demanding Central Excise duty in cash, denying Cenvat credit utilization as per Rule 8(3A) of Central Excise Rules, 2002. The demands included interest and penalties under section 11A and Rule 25 of Central Excise Rules, 2002.

2. The appellant argued that Rule 8(3A) was unconstitutional based on judgments by various High Courts, including Gujarat, Madras, Bombay, and Punjab & Haryana. Despite a stay on the Gujarat High Court judgment by the Supreme Court, the appellant contended that the underlying reasoning of the judgment still applied, citing the Space Telelink Ltd case law.

3. The departmental representative highlighted that once a superior court stays a judgment or admits an appeal, the ratio decidendi of the lower court is in jeopardy, referencing the West Coast Paper Mills Ltd case. The department argued that the stay on the Gujarat High Court judgment affected its validity.

4. The Tribunal examined the vires of Rule 8(3A) in light of the conflicting judgments. While the Gujarat High Court had struck down the rule as unconstitutional, the Supreme Court had stayed the judgment. However, no stay was issued against similar decisions by other High Courts. The Tribunal followed the decision of the Bombay High Court, holding that the demand was unsustainable, setting it aside along with the imposed penalties.

5. Ultimately, the Tribunal allowed the appeals, setting aside the impugned order and providing consequential relief to the appellant. The decision was pronounced in open court on 03.01.2020.

---