2021 (9) TMI 973 - AT - Central Excise

Tribunal grants appeal, orders consequential benefits & emphasizes retrospective effect of rule change.

The Tribunal allowed the appeal, setting aside the impugned order. The appellant was entitled to consequential benefits in accordance with the law. The ... CENVAT Credit - restrictions in using the cenvat credit for payment of duty for the clearances - contravention of Rule 8(3A) read with Rule 4(1), 8(1), 8(3) of Central Excise Rules - Applicability of Rule 25 of Central Excise Rules - HELD THAT:- There is a conflict in the provisions of Rule 8(3) and Rule 8(3A), prior to its substitution w.e.f. 11.07.2014. Rule 8(3) provides for levy of interest at the specified rates for late deposit of tax plus duty for the period of default. Thereafter, again Rule 8(3A) provides for denial of facility of paying duty through cenvat credit, and further deems the clearances so made by using cenvat credit as to have been cleared without payment of duty. Pursuant to quashing of Rule 8(3A) by the Hon’ble Gujarat High Court and other High Courts, inspite of filing of appeal by the Revenue before the Hon’ble Supreme Court, the Government have appreciated the anomaly in the Rules, and have chosen to substitute Rule 8(3A), which provides for payment of interest @ 1% p.m. on such amount of duty not paid, after one month of the due date, for each month and part thereof to be calculated from the due date, for the period during which such default continues - As per Rules of interpretation, a procedural law is always deemed to be retrospective, unless the same is categorically or specifically made prospective. Thus, the substituted Rule 8(3A) will have retrospective effect, from the date Central Excise Rules, 2002 came into effect. Applicability of Rule 25 of Central Excise Rules - HELD THAT:- The provisions of Rule 25 of Central Excise Rules are not attracted, as admittedly appellant have issued invoice for clearance, and transaction is recorded in books of account. Appeal allowed - decided in favor of appellant. Issues Involved:Whether the appellant was required to pay Central Excise duty again for goods cleared using cenvat credit, if the demand made against the said amount was correct and legal, and if the penalty imposed was justified.Detailed Analysis:Issue 1: Payment of Central Excise DutyThe appellant cleared goods by debiting duty from cenvat credit. The Revenue alleged a violation of Rule 8(3A) for not paying the outstanding duty in cash. The appellant argued that there was no breach of law on their part and cited various rulings in their support.Issue 2: Adjudication and PenaltyThe show cause notice was adjudicated ex-parte, confirming the demand with interest and proposing a penalty under Rule 25. The appellant appealed, contending that the rulings declaring Rule 8(3A) unconstitutional should apply.Issue 3: Tribunal DecisionThe Tribunal observed a conflict between Rule 8(3) and Rule 8(3A) before its substitution in 2014. It noted the quashing of Rule 8(3A) by High Courts and the subsequent substitution, providing for interest payment. The Tribunal held that the substituted rule should have retrospective effect, removing the basis for the show cause notice.Issue 4: Retrospective Effect and Rule InterpretationThe Tribunal applied the rule that procedural laws are deemed retrospective unless specified otherwise. It found that the impugned orders ignored the effect of the substituted rule and that Rule 25 was not applicable as the transactions were duly recorded.ConclusionThe Tribunal allowed the appeal, setting aside the impugned order. The appellant was entitled to consequential benefits in accordance with the law. The decision highlighted the retrospective effect of the substituted rule and the importance of considering legal amendments in such cases.