Cenvat credit utilisation during default period remains available where cash-only restriction under Rule 8(3A) is unconstitutional.

During the default period under Rule 8 of the Central Excise Rules, 2002, accumulated Cenvat credit could still be used to pay central excise duty. The demand proceeded on the view that payment had to be made in cash under Rule 8(3A), but the Tribunal noted that several High Courts had struck down that restriction as ultra vires. Following the jurisdictional High Court, it treated the relevant portion of the rule as unconstitutional and held that there was no bar on credit utilisation, making the impugned order unsustainable.

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Issues: Whether, during the default period under Rule 8 of the Central Excise Rules, 2002, the assessee was barred from utilising accumulated Cenvat credit for payment of central excise duty.

Analysis: The demand had been raised on the footing that payment during the default period had to be made in cash under Rule 8(3A) of the Central Excise Rules, 2002. The Tribunal noted that several High Courts had struck down the said provision as ultra vires, and relied on the jurisdictional High Court decision which had followed that view and held the relevant portion of the rule unconstitutional.

Conclusion: There was no bar on utilising accumulated Cenvat credit for payment of central excise duty during the default period, and the impugned order was unsustainable.

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