2022 (3) TMI 504
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....ated as the goods cleared without payment of duty, 29.02 I confirm the demand for the Central Excise duty amounting to Rs. 7173677- (Rupees seven lakhs seventeen thousand three hundred sixty seven only) for the period 06.12.2008 to 16.02.2009, and order its recovery from M/s Gujarat Colours & Coatings (P) Ltd., through Account Current under provisions of Section 11A of the Central Excise Act, 1944 read with provisions of Rule 8(4) of the Central Excise Rules, 2002 on account of their failure to observe the provisions of Rule 8(3A) of the Central Excise Rules, 2002. 29.03 I confirm the demand for the Central Excise duty amounting Rs. 2200338/- (Rupees twenty two lakhs three hundred and thirty eight only) for the period from 17.02.2009 to 31.12.2009, and order its recovery from M/s Gujarat Colours & Coatings (P) Ltd., through Account Current under provisions of Section 11A of the Central Excise Act, 1944 read with provisions of Rule 8(4) of the Central Excise Rules, 2002 on account of their failure to observe the provisions of Rule 8(3A) of the Central Excise Rules, 2002. 29.04 I confirm the demand for the Central Excise duty amounting Rs. 2130877/- (Rupees twenty one lakhs thi....
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....icated as per the order of the Additional Commissioner referred in para 1 above and upheld by the impugned order. 2.2 Aggrieved by the order, the appellant are in appeal. 3.1 We have heard Shri Manoj Chauhan, Chartered Accountant, and Shri Sanjay Hasija, Superintendent, Authorised Representative for the Revenue. 3.2 We find that Rule 8(3A) of the Central Excise Rules, 2002, in terms of which the demand has been made, was considered by Hon'ble Gujarat High Court in the case of Indsur Global Ltd. [2014 (310) ELT 833 (Guj.)] and the said rule has been held to be ultra vires. The relevant paragraphs of the said judgment are reproduced below:- "29. This brings us to the last limb of the petitioner's contention, namely, that the condition attached by sub-rule (3A) of Rule 8 is unreasonable and therefore, violative of Article 14 of the Constitution and amounts to serious restriction on the petitioner's right to carry on trade or business of his choice guaranteed under Article 19(1)(g) of the Constitution. This contention requires a closer scrutiny. As noted earlier, the restrictions of sub-rule (3A) come in two folds. Firstly, a defaulter assessee has to clear the consignments on spo....
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....te based on the excise duty paid invoice or other documents which a person has reason to believe as not genuine." This Rule 12CC as well as the notification issued by the Government would apply to special class of assessees who through their conscious act tried to evade duty. 30. It can be seen that the reasons for non-payment of excise duty can be manifold and not necessarily in all cases have to be willful default by an assessee despite availability of funds. Excise duty may remain unpaid due to economic reasons, due to slowness in the business or due to financial crunch temporarily felt by the manufacturer who though might have cleared the finished goods and also sold the goods in the market may not have received the payment as promised. All such cases of defaults willful or otherwise are clubbed together for the same treatment and a stringent condition of payment of excise duty without availing Cenvat credit is imposed. It can be appreciated that where a manufacturer falls behind the payment schedule on account of financial constraints, such as, slowing down of business, competition in the market reducing the profit margins, promised payments from the purchasers not coming ....
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....uty borders to creating a penalty. Insisting on an assessee in default to clear all consignments on payment of duty would be a perfectly legitimate measure. However, to insist that he must pay such duty without utilising CENVAT credit which is nothing but the duty on various inputs already paid by him would be a restriction so harsh and out of proportion to the aim sought to be achieved, the same must be held to be wholly arbitrary and unreasonable. We may recall, the delegated legislature in its wisdom now dismantled this entire mechanism and instead has provided for penalty at the rate of 1% per month on delayed payment of duty. 36. In the result, the condition contained in sub-rule (3A) of Rule 8 for payment of duty without utilizing the Cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion "without utilizing the Cenvat credit" of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002, shall be rendered invalid." 3.3 This judgment has been subsequently followed by various High Courts and Tribunal, including the jurisdictional High Court i.e. Hon'ble Bombay High Court in the case of Nashik Forge Pv....