Tribunal allows appeal, deems CENVAT credit payment valid, rules Rule 8(3A) unconstitutional, rejects duty demand

The Tribunal allowed the appeal, finding the payment of defaulted duty through CENVAT credit valid, ruling Rule 8(3A) unconstitutional, and rejecting the subsequent duty demand. The case was remanded for verification of CENVAT credit transfer between the appellant's units.

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Issues Involved:
1. Validity of payment of defaulted duty through CENVAT credit.
2. Applicability of Rule 8(3A) of Central Excise Rules, 2002.
3. Demand of duty for the period post-default.
4. Verification of CENVAT credit transfer between units.

Detailed Analysis:

1. Validity of Payment of Defaulted Duty through CENVAT Credit:
The appellant defaulted in paying the duty of Rs. 5,00,000/- for February 2013 by the due date. They paid this amount through their CENVAT credit account on 26.03.2013. The Commissioner rejected this payment, citing that the credit utilized was not available at the end of February 2013. However, the appellant argued that the payment was valid as per Rule 12A of the CENVAT Credit Rules, 2004, and supported by a Board circular dated 13.04.2018. The Tribunal noted that the Board's Circular No.962/05/2012-CX, dated 28.03.2012, clarified that arrears could be paid using CENVAT credit, and the Gujarat High Court in Advance Surfactant [2017 (358) ELT 53 (Guj)] held the proviso to Rule 3(4) of the CENVAT Credit Rules as unconstitutional. Thus, the Tribunal found the payment through CENVAT credit valid.

2. Applicability of Rule 8(3A) of Central Excise Rules, 2002:
Rule 8(3A) mandates that if an assessee defaults in payment of duty beyond 30 days, they must pay duty without utilizing CENVAT credit. The Gujarat High Court in Indsur Global Ltd. v. Union of India [2014 (310) E.L.T. 833 (Guj.)] and the Bombay High Court in Nashik Forge Pvt Ltd [2019 (368) ELT 20 (Bom)] declared Rule 8(3A) unconstitutional to the extent it restricts the use of CENVAT credit. The Tribunal followed these judgments and held that the restriction imposed by Rule 8(3A) was invalid.

3. Demand of Duty for the Period Post-Default:
The Commissioner demanded Rs. 4,13,14,846/- for the period from April 2013 to February 2014, arguing that the appellant's payment of Rs. 5,00,000/- on 26.03.2013 was invalid. The Tribunal, however, held that since the payment of the defaulted duty was valid, the subsequent demand could not be sustained. The Tribunal also noted that the demand raised under Rule 8(3A) read with Section 11A was improper as Rule 8(3A) itself was not amenable to Section 11A.

4. Verification of CENVAT Credit Transfer Between Units:
The appellant claimed to have transferred Rs. 43,26,000/- from Plant-IX to Plant-VII under Rule 12A(4) of the CENVAT Credit Rules, 2004. The Commissioner did not verify this transfer. The Tribunal remanded the matter to the Commissioner for the limited purpose of verifying this transfer. The Tribunal directed the Commissioner to record findings on the transfer within three months.

Conclusion:
The Tribunal allowed the appeal, holding that the payment of the defaulted duty through CENVAT credit was valid, Rule 8(3A) was unconstitutional, and the subsequent demand for duty was unsustainable. The matter was remanded to the Commissioner for verification of the CENVAT credit transfer between the appellant's units.

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