2021 (8) TMI 795 - AT - Central Excise

Tribunal Upholds Decision on Tax Demand, Interest, and Penalty

The Tribunal upheld the Commissioner's decision to drop the demand for Ed. Cess, S.H. Ed. Cess, and Central Excise Duty as the amounts were already paid. ... Levy of penalty - default in payment of excise duty - Constitutional validity of the Rule 8 (3A) of Central Excise Rules, 2002 - HELD THAT:- Since the Rule 8 (3A) which restricted the payment of Central Excise duty from the CENVAT Credit Account during the period of default, has been held unconstitutional by the Hon’ble High Court in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA & 2 [2014 (12) TMI 585 - GUJARAT HIGH COURT] to that extent, the very basis of Show Cause notice do not survive. In absence of the restriction imposed by the Rule 8 (3A) towards utilization of CENVAT Credit for payment of Central Excise duty the appellant cannot be defaulted for payment of duty by utilization of CENVAT Credit. Commissioner has category held in favour of the Appellant and have agreed that the appellant were making the payment of duty as due by utilizing the CENVAT Credit. Since Appellant were paying the duty utilizing the CENVAT Credit they cannot be charged for contravention of the provisions of Rule 4, 8(1), 8(3) & 8(3A) of the Central Excise Rules, 2002 for which the penalty has been imposed under Rule 25 of Central Excise Rules, 2002, equivalent to the demand of duty. In view of Hon’ble High Court order since we conclude that payment of duty by utilizing the CENVAT Credit was proper mode of payment of duty during the period of default, the penalty imposed on the Appellant needs to be set aside. Since the appeal filed by the revenue do not take into account the decision of Gujarat High Court, subsequently in case of Indsur Global Ltd., holding the Rule 8 (3A) unconstitutional to the extent of the restricting the payment of Central Excise Duty by utilizing CENVAT Credit, there are no merits in the appeal filed by the Revenue. Appeal allowed. Issues Involved:1. Validity of demand for Ed. Cess and S.H. Ed. Cess.2. Validity of demand for Central Excise Duty.3. Recovery of interest under Section 11AB of the Central Excise Act, 1944.4. Imposition of penalty under Rule 25 of Central Excise Rules, 2002.5. Constitutional validity of Rule 8(3A) of the Central Excise Rules, 2002.Detailed Analysis:1. Validity of Demand for Ed. Cess and S.H. Ed. Cess:- Commissioner's Decision: The Commissioner dropped the demand of Rs. 6855/- raised in the show cause notice on account of Ed. Cess and S.H. Ed. Cess under Section 11A of the Act as it had already been paid by the Noticee.- Tribunal's Analysis: The Tribunal upheld the Commissioner's decision to drop the demand since the amount had already been paid by the appellant.2. Validity of Demand for Central Excise Duty:- Commissioner's Decision: The Commissioner dropped the demand of Rs. 1,48,87,372/- (comprising Rs. 1,44,53,761/- Cenvat, Rs. 2,89,074/- Ed. Cess, and Rs. 1,44,547/- H S Ed. Cess) raised in the show cause notice under Section 11A of the Act as it had already been paid and the dispute in the manner of payment did not fall within the purview of Section 11A of the Act.- Tribunal's Analysis: The Tribunal noted that the payments made by the appellant by utilizing the CENVAT Credit could not have been considered as payment of duty during the period of default as per Rule 8(3) and 8(3A). However, the Tribunal also considered the constitutional validity of Rule 8(3A), which had been declared unconstitutional by the Hon'ble High Court of Gujarat in the case of Indsur Global Ltd. Consequently, the very basis of the show cause notice did not survive, and the Tribunal upheld the Commissioner's decision to drop the demand.3. Recovery of Interest under Section 11AB of the Central Excise Act, 1944:- Commissioner's Decision: The Commissioner ordered the recovery of interest under Section 11AB on the default payment made for October 2009 until the actual payment date and appropriated the amount already paid by the noticee.- Tribunal's Analysis: The Tribunal did not specifically address this issue in detail, but by implication, the recovery of interest was not contested separately from the main demands.4. Imposition of Penalty under Rule 25 of Central Excise Rules, 2002:- Commissioner's Decision: The Commissioner imposed a penalty of Rs. 1,48,87,372/- on the Noticee under Rule 25 for contravention of provisions of Rule 4, 8(1), 8(3), and 8(3A).- Tribunal's Analysis: The Tribunal concluded that since the payment of duty by utilizing the CENVAT Credit was deemed proper (following the High Court's decision on Rule 8(3A)), the appellant could not be charged for contravention of the provisions of Rule 4, 8(1), 8(3), and 8(3A). Consequently, the penalty imposed under Rule 25 was set aside.5. Constitutional Validity of Rule 8(3A) of the Central Excise Rules, 2002:- High Court's Decision: The Hon'ble High Court of Gujarat in Indsur Global Ltd. declared Rule 8(3A) unconstitutional to the extent that it restricted the payment of Central Excise duty from the CENVAT Credit Account during the period of default.- Tribunal's Analysis: Following the High Court's decision, the Tribunal held that the restriction imposed by Rule 8(3A) on utilizing CENVAT Credit for payment of Central Excise duty was invalid. Therefore, the appellant's payment method using CENVAT Credit was proper, and the penalty and demands based on this rule were not sustainable.Conclusion:- Appeal No E/460/2012 (Appellant): Allowed.- Appeal No E/614/2012 (Revenue): Dismissed.(Order pronounced in the open court)