Demand for duty payment default beyond 30 days under Rule 8(3A) CCR cannot be sustained (3A)

CESTAT Chennai held that demand for duty payment default beyond 30 days under Rule 8(3A) of CCR cannot be sustained. The tribunal relied on Gujarat HC's decision in Indsur Global Ltd. declaring Rule 8(3A) ultra vires, which was upheld after Revenue's SC appeal was settled through Lok Adalat. The assessee could utilize CENVAT credit despite payment default. Extended limitation period and penalties were also set aside as the primary demand failed. Appeal allowed.

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Issues:
1. Whether the demand for violation of Rule 8(3A) against the Appellant is sustainable.
2. Whether the demand can be raised invoking the extending period and imposition of penalty is justified.

Analysis:

The Appellant filed an Excise Appeal challenging Order-in-Original confirming demands for recovery of Cenvat Credit under Rule 14 of Cenvat Credit Rules, 2004. The demands were based on the Appellant's alleged default in payment of duty and belated filing of returns on a quarterly basis, exceeding the exemption limit for SSI units. The department issued a Show Cause Notice seeking recovery of wrongly utilized Cenvat credit, interest, and penalties. The adjudicating authority confirmed the demands and imposed penalties. The Appellant contended that the demand was not sustainable as per CBEC Circular and Supreme Court rulings. They argued that Rule 8(3A) was unconstitutional, citing various High Court decisions. The Appellant also challenged the imposition of penalties without proof of fraud. The Ld. Counsel relied on Tribunal orders and High Court judgments supporting the Appellant's position.

The main issue was whether the Appellant, who defaulted in duty payment, was bound by Rule 8(3A) requiring payment from PLA account when barred from using CENVAT credit. The department argued that the demand was justified due to the Appellant's exceeding exemption limits. However, various judicial authorities had held Rule 8(3A) as ultra vires, including the Hon'ble Gujarat High Court. The Tribunal noted that the Department's appeal against the Gujarat High Court decision was settled, rendering the High Court judgments as precedent. Following the decisions, the Tribunal held that the demand based on Rule 8(3A) was unsustainable and set it aside, leading to the dismissal of extended period invocation and penalties.

In conclusion, the Tribunal set aside the impugned Order-in-Original, allowing the appeal with consequential relief. The judgment emphasized the unenforceability of demands based on Rule 8(3A) and the absence of grounds for penalties. The decision was pronounced in open court on the specified date.

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