Cenvat credit utilisation cannot be denied after duty default where cash-only payment restriction is unconstitutional.

Rule 8(3A) of the Central Excise Rules, 2002 was treated as invalid to the extent it required a defaulting assessee to pay duty only in cash without using accrued Cenvat credit. The rule was described as a recovery mechanism for delayed payment, but not a valid basis to deny credit already earned. The settled position was that such a restriction exceeds the limits of delegated legislation. Accordingly, a demand insisting on payment from PLA alone was unsustainable, and utilisation of accumulated Cenvat credit remained permissible.

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Issues: Whether, after default in timely payment of central excise duty, the assessee could be compelled under Rule 8(3A) of the Central Excise Rules, 2002 to pay duty only in cash from PLA and denied utilisation of accumulated Cenvat credit.

Analysis: The Tribunal followed the binding declaration that the portion of Rule 8(3A) requiring payment of duty without utilising Cenvat credit is unconstitutional. It noted that the rule operates as a recovery mechanism for delayed duty and cannot, in the absence of a valid restriction, deny credit already accrued to the assessee. The Tribunal treated the issue as no longer res integra in view of the settled view that such compulsion is beyond the permissible limits of delegated legislation and cannot stand once the rule has been invalidated.

Conclusion: The assessee was not barred from paying duty by utilising accumulated Cenvat credit, and the demand insisting on payment from PLA was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: A rule that compels a defaulting assessee to pay excise duty in cash without allowing utilisation of accrued Cenvat credit is unconstitutional and cannot sustain a demand based on that restriction.

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