Appeal allowed: CENVAT credit valid, Rule 8(3A) inapplicable

The Tribunal allowed the appeal, holding that the payment of defaulted duty using CENVAT credit was valid, Rule 8(3A) was inapplicable post-26.03.2013, and the demands and penalties imposed were unsustainable. The Tribunal emphasized adherence to judicial precedents and Board's clarifications, ensuring fair treatment of the appellant's case.

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Issues Involved:
1. Validity of the payment of defaulted duty using CENVAT credit.
2. Applicability of Rule 8(3A) of the Central Excise Rules, 2002.
3. Recovery of duty and interest under Section 11A of the Central Excise Act, 1944.
4. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Validity of the Payment of Defaulted Duty Using CENVAT Credit:
The appellant defaulted in payment of duty for January 2013 and paid the defaulted amount on 26.03.2013 through their CENVAT credit account. The Commissioner held this payment as invalid under Rule 8(3A) of the Central Excise Rules, 2002. However, the Tribunal noted that the Hon'ble Gujarat High Court in the case of Indsur Global Ltd. declared Rule 8(3A) unconstitutional to the extent it prohibits the use of CENVAT credit for payment of duty. The Tribunal observed that the Board's Circular No. 962/05/2012-CX allows the use of CENVAT credit for payment of arrears. Additionally, the Hon'ble Gujarat High Court in Advance Surfactant held the proviso to Rule 3(4) of the CENVAT Credit Rules, 2004, unconstitutional, allowing the utilization of CENVAT credit for duty payment. Thus, the Tribunal concluded that the payment of Rs. 1,92,64,263/- from the CENVAT account was valid.

2. Applicability of Rule 8(3A) of the Central Excise Rules, 2002:
The Tribunal noted that Rule 8(3A) was struck down by multiple High Courts, including Gujarat, Bombay, and Madras, as unconstitutional. The Tribunal referenced the Hon'ble Bombay High Court's decision in Nashik Forge Pvt Ltd., which affirmed the Gujarat High Court's ruling. The Tribunal rejected the revenue's argument to remand the case pending the Supreme Court's decision, citing the Hon'ble Bombay High Court's ruling in Twenty First Century Wires Rods Ltd. Therefore, the Tribunal held that the rigors of Rule 8(3A) do not apply to the appellant's case after 26.03.2013.

3. Recovery of Duty and Interest under Section 11A of the Central Excise Act, 1944:
The Tribunal observed that the show cause notice and the adjudicating authority's order invoked Rule 8(3A) read with Section 11A for recovery of duty and interest. The Tribunal noted that Rule 8(3A) is not amenable to Section 11A, as it mandates consignment-wise duty payment in cash during the default period. Since the appellant paid the defaulted duty on 26.03.2013, the subsequent demand for the period from 26.03.2013 to 31.12.2013 was unsustainable. The Tribunal also highlighted that the appellant's delay in obtaining LTU membership contributed to the default, and the CENVAT credit transfer from the Hyderabad unit would have otherwise covered the duty payment.

4. Imposition of Penalty under Rule 25 of the Central Excise Rules, 2002:
The Tribunal found no justification for imposing a penalty of Rs. 33,78,20,452/- under Rule 25. Since the payment of defaulted duty through the CENVAT account was valid and the demands for the subsequent period were unsustainable, the penalty imposed was also set aside.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal. It held that the payment of defaulted duty using CENVAT credit was valid, Rule 8(3A) was inapplicable post-26.03.2013, and the demands and penalties imposed were unsustainable. The Tribunal emphasized adherence to judicial precedents and Board's clarifications, ensuring fair treatment of the appellant's case.

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