Cenvat credit restriction under Rule 8(3A) held unenforceable, making the related demand and penalty unsustainable.

Cenvat credit could not be denied for the defaulted period under Rule 8(3A) of the Central Excise Rules, 2002 because the restriction had been held ultra vires by the High Court decisions relied upon. With that restriction unenforceable, the assessee remained entitled to utilise credit during the relevant period, and the demand raised solely on the basis of denial of credit was not sustainable. The consequential interest and penalty also could not survive once the underlying denial of credit failed.

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Issues: Whether Cenvat credit could be denied for payment of duty during the defaulted period under Rule 8(3A) of the Central Excise Rules, 2002, and whether the demand, interest and penalty based on such denial were sustainable.

Analysis: The Tribunal noted that Rule 8(3A) of the Central Excise Rules, 2002 had been declared ultra vires by the High Court decisions relied upon. On that basis, the restriction on utilising Cenvat credit during the defaulted period could not be enforced against the assessee. Once the denial of credit was held unsustainable, the demand raised on that footing and the consequential penalty also ceased to survive.

Conclusion: Cenvat credit could not be denied for the defaulted period, and the demand and penalty were not sustainable.

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