Ultra vires restriction on Cenvat credit use during default period rendered the excise duty demand unsustainable.

Rule 8(3A) of the Central Excise Rules, 1944 was treated as ultra vires in line with binding judicial pronouncements, so the restriction on utilising Cenvat credit during the default period could not be enforced. On that basis, a duty demand founded solely on the assessee's use of Cenvat credit instead of cash during the disputed period had no legal support and was held unsustainable. The impugned demand was set aside and consequential relief followed.

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Issues: Whether Rule 8(3A) of the Central Excise Rules, 1944 was ultra vires and whether the demand raised for payment of duty by denying utilisation of Cenvat credit during the default period was sustainable.

Analysis: The issue was treated as already settled by binding judicial pronouncements following the view that Rule 8(3A) of the Central Excise Rules, 1944 had been struck down as ultra vires. Once the restriction on utilisation of Cenvat credit during the default period was held invalid, there remained no legal basis to sustain the demand solely on the ground that duty was paid through Cenvat credit instead of cash during the disputed period.

Conclusion: Rule 8(3A) of the Central Excise Rules, 1944 was held to be ultra vires and the demand based on its application was held unsustainable in favour of the assessee.

Final Conclusion: The impugned demand was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: A restriction on payment of central excise duty through Cenvat credit during a default period cannot be enforced once the underlying rule imposing that restriction has been held ultra vires.

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